SSE PLC SUSTAINABILITY REPORT 2019 - For a better world of energy -

SSE PLC SUSTAINABILITY REPORT 2019 - For a better world of energy -
For a better world of energy
SSE PLC SUSTAINABILITY REPORT 2019 - For a better world of energy -
S U S TA I N A B I L I T Y   R E P O R T

INDEX                                                                                                                                                STRATEGY                                    06           CLIMATE ACTION                       16     AFFORDABLE AND                        26
04       CHIEF EXECUTIVE’S INTRODUCTION                                   44         DECENT WORK AND ECONOMIC GROWTH
                                                                                                                                                                                                                                                          CLEAN ENERGY
                                                                                     47     Sharing economic value
06       STRATEGY                                                                    50     Payment practices and performance
         06     SSE’s business explained                                             52     Being a responsible employer
         08     SSE’s approach to sustainability
         10     Identifying material issues                               58         SSE’S UK GENDER PAY GAP

16       CLIMATE ACTION                                                   60         DO NO HARM
         18     Measuring carbon performance                                         61     Safety and health
         20     Advocating for climate action                                        62     Environment                                              SSE’s business strategy, the influence                    Meeting the challenge of climate           The cost-effective development
                                                                                                                                                     of its stakeholders, materiality                          change requires action to adapt to         of new renewable generation
         21     Adapting to a changing climate                                       64     Business culture
                                                                                                                                                     assessments, external trends and                          more extreme weather at the same           combined with a focus on serving
         22     Climate-related risks and opportunities                              65     Human rights and modern slavery                          increased governance underpin SSE’s                       time as actions to mitigate the most       energy customers, particularly the
                                                                                                                                                     approach to ensuring long-term                            dangerous climate outcomes.                most vulnerable support the goal of
26       AFFORDABLE AND CLEAN ENERGY                                      66         DISCLOSING SSE’S PERFORMANCE                                    sustainability.                                                                                      affordable and clean energy.
         28     Increasing renewable output                                          67     Environmental
         30     Serving distribution customers                                       68     Economic
         32     Helping households become ‘Generation Green’                         60     Social                                                   INDUSTRY, INNOVATION 36                                  DECENT WORK AND                      44     DO NO HARM                            60
         32     Supporting businesses’ low-carbon ambitions                          72     SSE’s UK Gender Pay Gap (by legal entity)                AND INFRASTRUCTURE                                       ECONOMIC GROWTH
         34     SSE Energy Services (held for sale)                                  74     SSE’s Green Bond reporting

         38     A growing transmission network
         40     Distribution network transformation
         42     Developing new renewable generation
         43     Flexible thermal generation

                                                                                                                                                     With energy infrastructure at SSE’s                       The way in which a low-carbon energy       SSE’s approach to sustainability built

                                                                                                                                                     core, innovation that delivers                            system is delivered supports significant   on a firm foundation to ’do no harm’
                                                                                                                                                     increased electricity network flexibility                 social value with good quality jobs,       to people or places. Underpinning
                                                                                                                                                     and investment in transmission                            vibrant supply chains and tax receipts     that is the reinforcement of an ethical
                                                                                                                                                     infrastructure is key to a low carbon                     supporting pubic services.                 business culture to ‘do the right thing’.

NEEDED TODAY WHILE                                                                                                                                   world.

BUILDING A BETTER WORLD                                                                                                                              DATA TABLES

                                                                                                                                                                                                                                                                      Stakeholders and investors

OF ENERGY FOR TOMORROW                                                                                                                                                                                                                                                seek data and information
                                                                                                                                                                                                                                                                      on a wide variety of
                                                                                                                                                                                                                                                                      environmental, social
                                                                                                                                                                                                                                                                      and economic metrics.
About this report                                                                                                                                                                                                                                                     To aid transparency this
The disclosure of SSE’s most material sustainability impacts is         refers to activities of joint ventures and in these instances it is made                                                                                                                      data is produced in tabular
integrated into its Annual Report 2019 and, given the demand from       clear this is the case. In 2019, SSE sought assurance on its carbon,                                                                                                                          form alongside a required
SSE’s stakeholders for comprehensive transparency on the impact it      water and Green Bond data from professional services firm PwC.                                                                                                                                green bond report and the
has on the outside world, this Sustainability Report provides greater   PwC also undertook the economic analysis of SSE’s contribution to                                                                                                                             subsidiary-level gender
detailed information around SSE’s key policies, management and          the UK and Irish economies.                                                                                                                                                                   pay gap.
performance in relation to its economic, social and environmental
impacts. The Sustainability Report is therefore intended to be the      About SSE
sister document to the Annual Report However, it also exists as a       SSE is an energy company listed on the London Stock Exchange.
standalone report in its own right and it is not necessary to read it   Formed in 1998, it now has operations and investments across
alongside the Annual Report.                                            the UK and Ireland and is involved in: the generation, transmission,
                                                                        distribution and supply of electricity; the production, storage,
The scope of this report is generally focused on performance data       distribution and supply of gas; and in the provision of energy-related     Disclaimer: The definitions SSE uses for adjusted financial measures are consistently
for the financial year ending 31 March 2019. On occasion the report     services.                                                                  applied and are explained and justified in the Annual Report 2019, page 143 to 147.

02         SSE plc Sustainability Report 2019                                                                                                                                                                                                             SSE plc Sustainability Report 2019          03
SSE PLC SUSTAINABILITY REPORT 2019 - For a better world of energy -
S U S TA I N A B I L I T Y   R E P O R T

Chief Executive’s Introduction

INTO SSE’S DNA                                                                                                                                                                        “IN A NUTSHELL, SUSTAINABILITY
                                                                                                                                                                                      FOR SSE MEANS THAT WE WILL
                                 Through its Sustainable Development Goals (SDGs), the United                                                                                         TACKLE CLIMATE CHANGE,
                                 Nations has created a blueprint for a sustainable world and in early                                                                                 CREATE A SUCCESSFUL BUSINESS
                                 2019, the SSE plc Board agreed to align our business strategy to them.
                                 Consequently, in March we adopted four fundamental business goals
                                                                                                                                                                                      AND DELIVER SIGNIFICANT
                                 which are directly linked to the UN’s SDGs.                                                                                                          SOCIAL VALUE TO THE
                                 Our first three goals – to cut in half the carbon         to deliver value for communities and we report,                                            COMMUNITIES WE SERVE.”
                                 intensity of the electricity we generate, to develop      extensively, on our investment in people and
                                 and build enough renewable energy capacity to             our record in meeting the aspirations within our
                                 treble renewable output and help accommodate              ‘responsible employer ethos’.
                                 10 million electric vehicles on Britain’s electricity
                                 networks – are in direct response to the low-carbon       This year we have also sought to develop our reporting
                                 challenge. These three goals represent the most           of climate-related risks and opportunities and, for the
                                 material contribution SSE can make to sustainable         first time, disclosed detail and quantification of those
                                 development and also represent a hugely progressive       risks and opportunities. This is part of our plan to be
                                 and exciting strategy for business growth.                fully compliant with the Task Force on Climate-related
Alistair Phillips-Davies
                                                                                           Financial Disclosures’ recommendations by
Chief Executive
                                 And because we understand that enormous social            March 2021.
                                 value can be created – or destroyed – in the way that
                                 we deliver those goals, we have also committed for        The case for a net zero carbon target for the UK has
                                 the long-term to the principles of Fair Tax and a real    been overwhelming through 2018/19. At SSE, we’ve
                                 Living Wage.                                              been enthusiastic champions of that case. We don’t
                                                                                           just believe it should be done, we believe it can be
                                 In a nutshell, sustainability for SSE means that we       done. In every net zero carbon scenario, the critical
                                 will tackle climate change, create a successful           role of renewable electricity is clear, particularly to
                                 business and deliver significant social value to          decarbonise the transport and heat sectors. I am
                                 the communities we serve. And creating significant        looking forward to working closely with policy makers
                                 social value reinforces our ability to create value for   on the practical actions that need to be taken and SSE
                                 shareholders as well.                                     hopes to play a highly significant role in that delivery.

                                 So, in our Sustainability Report 2019 – the sister        Finally, I have been determined to ensure that the
                                 document of SSE’s Annual Report 2019 – we have            principles of sustainability are embedded into the
                                 structured our disclosures according to the four SDGs     DNA of SSE. I think we made important steps forward
                                 that have identified as being most material.              in 2018/19 with our new 2030 Goals and changes
                                                                                           to sustainability governance, but I am very keen
                                 SSE has sought, for many years now, to constantly         to hear exactly what our stakeholders think of our
                                 develop and improve the transparency and disclosure       efforts to far. That means I actively encourage people
                                 of our social, economic and environmental impacts.        with an interest in SSE to get in touch by emailing
                                                                                  if you have any comments
                                 In this report, we outline our carbon and wider           on our sustainability strategy, performance and
                                 environmental impacts, the initiatives we take            reporting.

Carbon intensity of                              Renewable output                                Economic contribution                                 Taxes paid        Total recordable injury rate –       Jobs supported
generated electricity                            (inc. pumped storage)                                                                                                   employees and contractors combined   in UK and Ireland

284                                              9,779GWh                                        UK: £8.9bn                                            UK: £404m         0.16 per                             105,250
gCO2e/kWh                                                                                        Ireland: €689m                                        Ireland: €14.6m   100,000 hours worked

04         SSE plc Sustainability Report 2019                                                                                                                                                                     SSE plc Sustainability Report 2019   05
SSE PLC SUSTAINABILITY REPORT 2019 - For a better world of energy -
                                                                                                                         Strategic overview
                                                                                                                                        Strategic overview
S U S TA I N A B I L I T Y   R E P O R T

SSE's business explained                                                                                                                                                         SSE's business explained

                  AND AND
                            STRATEGYAND STRATEGY
                                                                                                                                                                                                                                                                                                                                                                     To be a le

                                                                                                                                                                                                                                                                                                                                                                     To provid
SSE brings together people with talent, skill and common                                                                 The transition to The
                                                                                                                                             a low-carbon
                                                                                                                                                 transition to economy
                                                                                                                                                                 a low-carbon
                                                                                                                                                             SSE’s     visionpresents
                                                                                                                                                                               is toeconomy
                                                                                                                                                                                      be significant
                                                                                                                                                                                          a leading    growth
                                                                                                                                                                                                       energy   opportunities
                                                                                                                                                                                                                company  growth
                                                                                                                                                                                                                            in afor
                                                                                                                                                                                                                                 opportunities for
                                                                                                                                                                                                                                  low-carbon world. Its purpose
                                                                                                                                                                                                                                                                                                                                                                     energy fo

values to create value for shareholders and society                                                                      SSE. It’s vision, purpose
                                                                                                                                           SSE. It’s vision,
                                                                                                                                                      and strategy
                                                                                                                                                             purpose    align
                                                                                                                                                                                           align with
                                                                                                                                                                                                          and policy
                                                                                                                                                                                                                           and policy trends.
by developing, operating and owning energy-related                                                                                                           is to provide the energy needed today while building a better world of energy for
                                                                                                                         Everything it doesEverything
                                                                                                                                               is grounded
                                                                                                                                                         it does
                                                                                                                                                               in ais financial
                                                                                                                                                                       grounded  discipline
                                                                                                                                                                                    in a financial
                                                                                                                                                                                                      demandswhichthat investment
                                                                                                                                                                                                                        demands that investment                                                                                                                      Strateg
infrastructure and businesses.                                                                                                                               tomorrow. And its strategy is to create value for shareholders and society from                                                                                                                         To create
                                                                                                                         secures returnssecures
                                                                                                                                            that arereturns
                                                                                                                                                                thanare thegreater
                                                                                                                                                                             cost ofthan
                                                                                                                                                                                           the cost
                                                                                                                                                                                                      of capital,
                                                                                                                                                                                                                       and sustains
                                                                                                                                                                                                                             earnings and sustains                                                                                                                   owning a
                                                                                                                                                             developing, operating and owning energy and related infrastructure in a sustainable
At the core of SSE’s business are its economically-                                                                      dividend commitments.
                                                                                                                                           dividend commitments.
                                                                                                                                                       The strategy is builtThe strategy
                                                                                                                                                                                  on four pillars:
                                                                                                                                                                                            is built on four pillars:                                                                                                                                                sustainab
regulated electricity networks businesses, which operate                                                                                                     way. This strategy, which is underpinned by a commitment to strong financial
under Scottish and Southern Electricity Networks (SSEN),                                                                                                     management, is built on four pillars.
and the development and operation, as well as ownership,
of renewable generation assets.
                                                                                                                             S T R A T E G I C P I L L SATRR #
                                                                                                                                                             A 1T E G I C P I L L A R # 1        S T R A T E G I C P I L L SATRR #
                                                                                                                                                                                                                                 A2T E G I C P I L L ASRT R#A2T E G I C P I L L A R # 3                                                                                  STR
                                                                                                                                                                                   STRATEGIC PILL AR # 1                      STRATEGIC PILL AR # 2                               STRATEGIC PILL AR # 3
These core businesses are complemented by flexible
thermal electricity generation and a series of energy
services businesses, all with a strategic focus to                                                                           Focusing on              Focusing
                                                                                                                                                           the coreon                 the core Developing,
                                                                                                                                                                                Focusing                         Developing,
                                                                                                                                                                                                                 Developing,    operating,        value
                                                                                                                                                                                                                                                     Creating                                                                                                            Be
                                                                                                                                                                                 businesses are the engineowning owning owning
provide energy-related services in a low-carbon world.                                                                       SSE’s core, low-carbon businesses
                                                                                                                                                      SSE’s core, low-carbon
                                                                                                                                                                   are the engine                                            A strategy of developing, operating and owning                                                                                              A sus
Furthermore, SSE Energy Services provides energy to                                                                          rooms of its strategic delivery.
                                                                                                                                                              of its strategic
                                                                                                                                                                                 from the
                                                                                                                                                                               delivery.       core
                                                                                                                                                                                         Earnings derived from   operating,                          value
                                                                                                                                                                                                                             creates value for shareholders. A dividend commitment built                                                                                 solut
around 6 million households in GB. SSE Energy Services                                                                       renewable sources of energyrenewable
                                                                                                                                                               and regulated
                                                                                                                                                                     sources of    energy
                                                                                                                                                                                      energy   networks
                                                                                                                                                                                                 and regulated energy At thenetworks
                                                                                                                                                                                                                                very heart of SSE’sAt
                                                                                                                                                                                                                                                      the veryis heart
                                                                                                                                                                                                                                                                  a commitment
                                                                                                                                                                                                                                                                        of SSE’s strategy
                                                                                                                                                                                                                                                                                  on toworld-class
                                                                                                                                                                                                                                                                                              is a commitment
                                                                                                                                                                                                                                                                                                         assets, growth
                                                                                                                                                                                                                                                                                                                     to      options and the skills and                  purpo
continues to be held for disposal and in the meantime                                                                        account for roughly 80%account
                                                                                                                                                          of Groupforrevenue,
                                                                                                                                                                       roughly 80% andSSE’s     core renewables
                                                                                                                                                                                               these   revenue, and itand
                                                                                                                                                                                                                         is these operating and    At the   verythe
                                                                                                                                                                                                                                                       owning       heart  ofthat
                                                                                                                                                                                                                                                                       assets  SSE’s
                                                                                                                                                                                                                                                                                      owning the     SSEassets
                                                                                                                                                                                                                                                                                                          has inthatDecarbonisation
                                                                                                                                                                                                                                                                                                                     create technologies     offers   SSE the
                                                                                                                                                                                                                                                                                                                                                   fairly                busin
SSE remains focused on providing market-leading                                                                              businesses that are bestbusinesses
                                                                                                                                                         place to seize
                                                                                                                                                                      thatthe         electricity
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                                                                                                                                                                                                                                                                                   to the     has shareholders      opportunity
                                                                                                                                                                                                                                                                                                                       for Ittheir     to put its
                                                                                                                                                                                                                                                                                                                               has continued       assets,
                                                                                                                                                                                                                                                                                                                                                faith  and               Unite
customer service and delivering efficiency savings                                                                           presented by decarbonisation
                                                                                                                                                                                      are welland      electrification.
                                                                                                                                                                                                    place             world-class assets, a coveted
                                                                                                                                                                                                            to seize the                           world-class
                                                                                                                                                                                                                                                                      of opportunities,
                                                                                                                                                                                                                                                                 operate   aand
                                                                                                                                                                                                                                                                                  own    pipeline
                                                                                                                                                                                                                                                                                            and As     ofwas
                                                                                                                                                                                                                                                                                                                     in 2018/19,
                                                                                                                                                                                                                                                                                                                             and experience
                                                                                                                                                                                                                                                                                                                           and       successful transactions
                                                                                                                                                                                                                                                                                                                                                  to work
                                                                                                                                                                                                                      skills and sector experience skills                   Vision:
to help keep the cost of energy as low as possible.                                                                                                                                   opportunities presented                                      the inassets
                                                                                                                                                                                                                                                                   that experiencecaninalso
                                                                                                                                                                                                                                                                         create lasting   project
                                                                                                                                                                                                                                                                                                          substantial  value to finance
                                                                                                                                                                                                                                                                                                                    in creating      lastingfurther
                                                                                                                                                                                                                                                                                                                                              value. SSE                 Throu
                                                                                                                             Changes to SSE’s business  Changes
                                                                                                                                                                   to SSE’s
                                                                                                                                                                               business      from
                                                                                                                                                                                             structure   implemented  procurement,
                                                                                                                                                                                                                          from          construction
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                                                                                                                                                                                                                                                                                       leading energyfor    company
                                                                                                                                                                                                                                                                                                                   and   in a low-carbon
                                                                                                                                                                                                                                                                                                                        discretionary         world.
                                                                                                                                                                                                                                                                                                                                          share  buybacks, or            a sus
                                                                                                                                                                                      by decarbonisation and                                       value and are vital to the                                       continues to fairly       remunerate
For more detail of SSE’s business operations, see                                                                            1 April 2019 have created  1 April
                                                                                                                                                                                                    focus for individual
                                                                                                                                                                                                                            businessservice and finance
                                                                                                                                                                                                                                                          that service
                                                                                                                                                                                                                                                                                    for both
                                                                                                                                                                                                                                                                                         that enhances
                                                                                                                                                                                                                                                                                                   to the management
                                                                                                                                                                                                                                                                                                             value for bothof net debt.                                  forefr
                                                                                                                                                                                      electrification, and account                                 low-carbon transition.   Purpose:An                              shareholders at the same time
                                                                                                                             units and clear visibility of
                                                                                                                                                                                       of is
                                                                                                                                                                                           value. In particular, SSEshareholders
                                                                                                                                                                                                                        is             and society.shareholders and society.                                                                                             enab
pages 4 and 5 of SSE’s Annual Report 2019.                                                                                                                                            for the large       majority   of Group                      increased investment           appetite
                                                                                                                                                                                                                                                                            To provide     the energy               astoday
                                                                                                                                                                                                                                                                                                                       creating       social, economic
                                                                                                                             consolidating the development,
                                                                                                                                                                          the development,
                                                                                                                                                                                 and ownership      operation
                                                                                                                                                                                                       of        and ownership of                                                 The same        strategyneeded
                                                                                                                                                                                                                                                                                                             also creates      while
                                                                                                                                                                                                                                                                                                                              real,    building
                                                                                                                                                                                                                                                                                                                                    lasting valuea better world of
                                                                                                                                                                                                                                                                                                                                                    for society.         realis
                                                                                                                             renewables assets underrenewables
                                                                                                                                                          a single entity
                                                                                                                                                                       assetsto be
                                                                                                                                                                                         a single    It
                                                                                                                                                                                                as SSE  has  the  largest
                                                                                                                                                                                                     entity to be known
                                                                                                                                                                                                                      An increased
                                                                                                                                                                                                                             as SSE investmentAn   for  low-carbon
                                                                                                                                                                                                                                                       increased          electricity
                                                                                                                                                                                                                                                               for low-carbon
                                                                                                                                                                                                                                                                    investment appetiteforassets
                                                                                                                                                                                                                                                                                  SSE makes    for alow-carbon      and   environmental
                                                                                                                                                                                                                                                                                                      significant electricity                  value forit
                                                                                                                                                                                                                                                                                                                    contribution to the economies                        low-c
                                                                                                                             Renewables. This new model
                                                                                                                                                            also gives   new installed
                                                                                                                                                                              model    to renewable
                                                                                                                                                                                focus alsothe          capacity
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                                                                                                                                                                                                                     the             presents
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                                                                                                                                                                                                                                                form   new
                                                                                                                                                                                                                                                             financialto form
                                                                                                                                                                                                                                                                          to form
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                                                                                                                                                                                                                                                                                                                          tax, at thewithin.
                                                                                                                             specific requirements ofspecific
                                                                                                                                                      SSE’s Distribution
                                                                                                                                                              requirements    across
                                                                                                                                                                          andof         the UK andand
                                                                                                                                                                                 SSE’s Distribution  Ireland,
                                                                                                                                                                                                           partnerships              new
                                                                                                                                                                                                               and the and create partnerships       andpartnerships
                                                                                                                                                                                                                                            from successful                and
                                                                                                                                                                                                                                                                           in thesuccessful
                                                                                                                                                                                                                                                                                    right place.  SSEmakes
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                                                                                                                             networks businesses, wh networks
                                                                                                                                                      ich are vital
                                                                                                                                                                             wh  ich are vitalcapacity
                                                                                                                                                                                  enablers.            connected
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                                                                                                                                                                                                                                                                                                          in which      operates by from
                                                                                                                                                                                                                                                               To create  value   forowning
                                                                                                                                                                                                                                                                                       shareholders     and  society   from   developing,
NETWORKS                                        WHOLESALE                                    RETAIL                          These low-carbon renewables
                                                                                                                                                     These low-carbon
                                                                                                                                                             and networks
                                                                                                                                                                              to its electricity transmission
                                                                                                                                                                             businesses  and
                                                                                                                                                                                             networks  businesses
                                                                                                                                                                              network in the north of Scotland      recycling
                                                                                                                                                                                                                      are     will
                                                                                                                                                                                                           and operating, but not always
                                                                                                                                                                                                                                     and  operating,
                                                                                                                                                                                                                                     assets. to
                                                                                                                                                                                                                                                 be an
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                                                                                                                                                                                                                                                                               to  anto
                                                                                                                                                                                                                                                                                                     and related
                                                                                                                                                                                                                                                                                                                    infrastructure   in a

BUSINESSES                                      BUSINESSES                                   BUSINESSES                      complemented by thermal complemented
                                                                                                                        vital flexibility complementing
                                                                                                                                                         generation plant
                                                                                                                                                    vital flexibility
                                                                                                                                                                       by thermal
                                                                                                                                                             the variability
                                                                                                                                                                            that provides
                                                                                                                                                                                    generation plant that realise
                                                                                                                                                                                      is almost entirely renewable.
                                                                                                                                                                              of renewables
                                                                                                                                                                                                                   value from development
                                                                                                                                                                                         the variability of renewables
                                                                                                                                                                                                                                     realise value
                                                                                                                                                                                                              SSE can add value from SSE
                                                                                                                                                                                                                                            can addand
                                                                                                                                                                                                                                                                          for to
                                                                                                                                                                                                                                                                                so retaining
                                                                                                                                                                                                                                                                                       and delivering
                                                                                                                                                                                                                                                                                   a low-carbon
                                                                                                                                                                                                                                                                                                 key stakes
                                                                                                                                                                                                                                                                                      retain options
                                                                                                                                                                                                                                                                                                               so          to support the

SSE owns and operates electricity               SSE owns and operates renewable              SSE supplies energy and provides
                                                                                                                        output during the low-carbonoutput transition,
                                                                                                                                                              during theand
                                                                                                                                                                               a B2B transition, and a B2B    future growth.           future growth.
distribution networks in the north of           energy assets across the UK and Ireland,     infrastructure services to business
                                                                                                                        operationsand  that provide operations
                                                                                                                                                    key energy thatservices
                                                                                                                                                                             for customers
                                                                                                                                                                                  key energy services for customers                                               Long-term dividend
Scotland and central southern England,          complemented by a portfolio of flexible                                 and which
                                                                                             public sector customers through       itssecure valuable
                                                                                                                                                          whichto secure
                                                                                                                                                                             for SSE’s
                                                                                                                                                                                     routes to market for SSE’s
                                                                                                                                                                                                              Growth could also come   Growth
                                                                                                                                                                                                                                         from areas
                                                                                                                                                                                                                                                      also come
                                                                                                                                                                                                                                                                     home  areas beyond SSE’s home
                                                                                                                                                                                  S T R A T E G I C P I L L Amarkets
                                                                                                                                                                                                                R # 3 in Great Britain markets                   SItTisRthe
                                                                                                                                                                                                                                                                          A Tisland
                                                                                                                                                                                                                                                                               E G I of
                                                                                                                                                                                                                                                                                     C Ireland.
                                                                                                                                                                                                                                                                                        P I L L AItRis actively
and the electricity transmission network        thermal power stations. It owns and                                     generation fleet.
                                                                                             Business Energy and Enterprise divisions.              generation fleet.                                                                         STRATEGIC PILL AR # 4
                                                                                                                                                                                                                                       and the island
                                                                                                                                                                                                                                                in Great
                                                                                                                                                                                                                                                      of Britain
                                                                                                                                                                                                                                                         Ireland.and     actively
in the north of Scotland. SSE also has an       operates gas storage facilities in the UK,   It also supplies energy and related                                                                                      seeking opportunities toseeking
                                                                                                                                                                                                                                                            – with strict capital
                                                                                                                                                                                                                                                                           to deploy
                                                                                                                                                                                                                                                                                       – with strict capital discipline
                                                                                                                       Revenue split by segment
                                                                                                                                            Revenue split by segment                                                  – its skills an experience–initsgeographies
                                                                                                                                                                                                                                                       skills an experience
                                                                                                                                                                                                                                                                    with fast-growing
                                                                                                                                                                                                                                                                             in geographies with fast-growing
ownership interest in gas distribution in       operates an energy portfolio management      services to household customers on the
Scotland and southern England.                  division and invests in gas production.      island of Ireland through SSE Airtricity. X.X%
                                                                                                                                                      X.X% Lorem ipsum
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                                                                                                                                                                                                                                                                                    social development.       Goals.
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From 1 April 2019 internal changes were         The development and operation of             carbon transition are part of the mix too.                                               t TBC the As
                                                                                                                                                                                                     was seen
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                                                                                                                                                                                                                    C its vision
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                                                                                                                                                                                                                                   of being     a leading energy company in a low-carbon world.
implemented designed to allow decision-         all of its renewables assets have been       Thermal generation provides flexibility;                                    can also create substantial value to finance further                                                     Through these four goals, the UN has created a blueprint for
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                                                                                                                                                                         contribute to the management of net debt.                                                                forefront of its business, with a strategy that is geared to
possible and to give added focus to the         team in a business known as SSE              Ireland) customer businesses offer a
                                                                                                                                                                                                                                                                                  enabling decarbonisation and to enabling the Group to
core and complementary businesses that          Renewables. The new model also takes         valuable route to market; energy
                                                                                                                         See                                             The same strategy also creates    real,[xx]
                                                                                                                                                                                                                      valueSee
                                                                                                                                                                                                                             for society.                                         realise its vision
                                                                                                                                                                                                                                                                                               [xx] of being a leading energy company in a
drive delivery of SSE’s strategy.               greater account of the differences           trading balances risk; E&P is anpage [xx]         See page [xx]                                      See page
                                                                                                                                                                         SSE makes a significant contribution to the economies it
                                                                                                                                                                                                                                 page [xx]                                        See page
                                                                                                                                                                                                                                                                                  low-carbon world.
                                                                                                                                                                                                                                                                                                                                                                         See p
                                                between SSEN’s Distribution and              investment that continues to provide                                        operates in by paying the right amount of tax, at the right
A new Group operating model reflects            Transmission networks businesses,            good returns; and SSE Enterprise is                                         time, in the right place. SSE makes significant economic
                                                                                                                                                                                                                                                                                               Climate action: Reduce the carbon intensity of
that the large majority of SSE’s earnings       while still recognising what they have in    building opportunities in02distributed         02Report 2019
                                                                                                                                 SSE plc Annual                          contribution
                                                                                                                                                        SSE plc Annual Report 2019      to the countries in which it operates by
                                                                                                                                                                                                                                                                                               electricity generated by 50% by 2030, compared
are derived from regulated energy               common.                                      energy, facilitating the growth of electric                                 sustaining and creating quality jobs, paying fair wages,
                                                                                                                                                                                                                                                                                               to 2018 levels, to around 150g/kWh.
networks and renewable sources of                                                            vehicles and creating value through its                                     committing to tax transparency, supporting indigenous
energy.                                         Businesses that complement the low-          telecoms partnership.                                                       supply chains and delivering infrastructure to support the
                                                                                                                                                                                        transition to a low-carbon economy.
                                                                                                                                                                                                                                                                                               Industry, innovation and infrastructure: Build
06         SSE plc Sustainability Report 2019                                                                                                                                           Long-term dividend                                                                                     electricity network  flexibility and infrastructure
                                                                                                                                                                                                                                                                                                            SSE plc Sustainability Report 2019                  07
                                                                                                                                                                                                                                                                                               that helps accommodate 10 million electric
                                                                                                                                                                                                                                                                                               vehicles in GB by 2030.
SSE PLC SUSTAINABILITY REPORT 2019 - For a better world of energy -

            S U S TA I N A B I L I T Y         R E P O R T

             SSE's approach to sustainability                                                                                                                                                       SSE's approach to sustainability

            ADVANCING A                                                                                                                                                                             SSE’S SUSTAINABILITY
            SUSTAINABLE BUSINESS                                                                                                                                                                    FRAMEWORK
            Four new 2030 Goals, aligned to the UN’s Sustainable Development Goals (SDGs),                                                                                                          SSE’s Sustainability Framework is designed to ensure that in achieving its core business
            underpin SSE’s strategic focus on long-term, low-carbon and sustainable assets; and                                                                                                     objectives, SSE conducts itself in a way that respects the social contract it has with
            they commit SSE to delivering its strategy in a way that creates value for shareholders                                                                                                 society and creates long-term value. The framework features a core set of policies
            and for society.                                                                                                                                                                        and procedures supported by a governance structure designed to ensure SSE
            Four fundamental goals for 2030                                                                                                                                                         addresses the most material issues to its key stakeholders and wider society.
            SSE’s strategic focus on core businesses that support and enable the transition to a low-carbon electricity
            system provided an important opportunity to ensure SSE’s drive to be a sustainable business is not in addition                                                                          Governance
            to its core strategy, but central to it.                                                                                                                                                SSE’s governance of sustainability issues within
                                                                                                                                                                                                    its business is built on the values of transparency,
            Following a year of consultation with employees and key external stakeholders, it was decided to align SSE’s                                                                            accountability and operating with integrity.                              “THE CHALLENGE FOR GOOD
            sustainability framework with the UN’s SDGs. Employees considered it important that SSE places itself within
            the context of a greater global effort, particularly in the fight against climate change. External stakeholders were particularly keen to
                                                                                                                                                                                                                                                                              SUSTAINABILITY GOVERNANCE IS NOT
                                                                                                                                                                                                    SSE’s Chief Executive has overall lead responsibility for
            encourage visibility of progress against set targets and to ensure clear accountability for meeting them.                                                                               sustainability, including at Board-level. The Board is                    TO HAVE GREAT GOVERNANCE OF A
            SSE identified four SDGS which are highly material to its business: SDG 13 Climate Action; SDG 7 Affordable and Clean Energy; SDG
                                                                                                                                                                                                    advised on matters of safety, health and environment                      SUSTAINABILITY STRATEGY. RATHER, IT IS
                                                                                                                                                                                                    (SHE) by the Safety, Health and Environment Advisory
            9 Industry, Innovation and Infrastructure; and SDG 8 Decent Work and Economic Growth. In March 2019, it set ambitious business                                                          Committee (SHEAC). The SHEAC has an overarching                           TO HAVE SUSTAINABILITY GOVERNANCE
            goals for 2030 that aligned to each of the most material SDGs and – most importantly – are central and core to SSE’s business                                                           role in supporting SSE’s commitment to be a sustainable
            purpose and strategy.                                                                                                                                                                                                                                             OF A GREAT BUSINESS STRATEGY.”
                                                                                                                                                                                                    company that makes a positive contribution to the
                                                                                                                                                                                                    communities and societies of which it is part. In
                                                                                                                                                                                                    fulfilling this role, the SHEAC reviews and oversees the                  Helen Mahy, SSE plc Board Non-Executive
                                                                                                                                                                                                    implementation of key sustainability-related Group                        Director and Chair of the SHEAC
                                                                                                                                                                                                    policies, including the Safety and Health, Environment
                                                                                                                                                                                                    and Climate Change, and Sustainability policies.

                                                                                                                                                                                               The Group Executive Committee (GEC) is responsible
                                                                                                                                                                                               for implementing Group strategy set by the Board.
                                                                                                                                                                                                                                                                                Reinforcing future
                                                        Cut our carbon                                     Help accommodate                                             Treble renewable                                   Champion Fair Tax and
                                                                                                                                                                                               Sustainability is integrated and considered within the
                                                                                                                                                                                                                                                                                governance of sustainability
                  our carbon                            Treble
                                                       Help         renewable
                                                                  our    carbon                Treble
                                                                                             Help          renewable
                                                                                                              Fair Tax and            Treble renewable
                                                                                                                                  Champion          Fair Tax and          Champion Fair Group  Tax and   strategy. The GEC also monitors the operational
                                                       intensity by 50%
                                                     10m  energy
                                                               electric output
                                                                               50%         10m   energy
                                                                                              a real
                                                                                                          10m electric vehicles
                                                                                                                    Wage                 energy
                                                                                                                                     a real          output
                                                                                                                                                Living    Wage
                                                                                                                                                                         energy output
                                                                                                                                                                             a real Living Wage
                                                                                                                                                                                                                             a real Living Wage
                                                                                                                                                                                               and financial performance of sustainability related                              On 1 April 2019, SSE created the new role of Chief
                                                                                                                                                                                                                                                                                Sustainability Officer (CSO), with the role reporting
                                                                                                                                                                                               activities across the organisation. It is supported by the
                                                                                                                                                                                                                                                                                directly to the Chief Executive. SSE believes that it is
 of         Reduce
               Build the
                                   intensity of    Reduce the carbon intensity of
                                                         Build  theand build
                                                                    carbon    by 2030
                                                                             intensity of Be  Develop
                                                                                                  leading and    Build electricity network
                                                                                                            company  by 2030
                                                                                                                       in the  UK Be Develop
                                                                                                                                     the        and
                                                                                                                                          leading   build
                                                                                                                                                  company by 2030
                                                                                                                                                             in the  UKDevelop and build byGroup
                                                                                                                                                                          Be the  leading company in theSafety,
                                                                                                                                                                                                  2030    UK     Health
                                                                                                                                                                                                                      BeandtheEnvironment  Committee
                                                                                                                                                                                                                                leading company    ininthe UK                   one of only a small number of FTSE 100 companies
 by        flexibility
                                    by 50% that
                                             by       enough renewable
                                                     flexibility and
                                                                  generated   energy
                                                                     infrastructure   to
                                                                               by 50%that
                                                                                       by andenough
                                                                                           flexibility  renewable
                                                                                                            infrastructure    to
                                                                                                                              Tax   enough
                                                                                                                                  and  Irelandrenewable   energy
                                                                                                                                                championing    Fairto
                                                                                                                                                                    Tax                        relation
                                                                                                                                                                           and Ireland championing         to sustainability matters.
                                                                                                                                                                                                    Fair Tax
els,       helps
                   compared to 2018 10 million
                                         levels,   electricity
                                                      helps      generated
                                                             compared     to output
                                                                             2018    by
                                                                                      to 50% byhelps
                                                                                10 million
                                                                                    levels,         treble
                                                                                                      and      flexibility
                                                                                                             real        Wage.and
                                                                                                                                to infrastructure
                                                                                                                          10 million       treble    that
                                                                                                                                              and renewable
                                                                                                                                                  a real Livingoutput
                                                                                                                                                                        enough renewable          energy to
                                                                                                                                                                                  and a real Living Wage.             and Ireland championing Fair Tax                          in which the organisation’s principal sustainability role
               to around
                            150gCO    /kWh.
                               in GB 2by 2030.     2030, tocompared
                                                      electric 30TWh
                                                                    150gCO  GBto2/kWh.
                                                                        ainyear. by2018
                                                                                     2030. levels,electric vehicles
                                                                                                            30TWh    in GBaccommodate
                                                                                                                     a year.
                                                                                                                           by 2030.         10 million
                                                                                                                                                  30TWh a year.          treble renewable output          to
                                                                                                                                                                                                    More information on SSE’sand a real Living
                                                                                                                                                                                                                              governance       Wage.
                                                                                                                                                                                                                                         structure, and the                     has this reporting line.
                                                      to around 150gCO2/kWh.                                   electric vehicles in GB by 2030.                                 30TWh a year.roles and responsibilities of different committees, and
                                                                                                                                                                                                    the Remuneration Report can be found in the Corporate                       The CSO is responsible for advising the Board,
                                                                                                                                                                                                    Governance section of the Directors’ Report in SSE’s                        Group Executive Committee and business units on
                                                                                                                                                                                                    Annual Report 2019, pages 116 to 139.                                       sustainability-related issues and strategy.

                                                                                                                                                                                                    Increasing accountability                                                   In addition to reporting directly to the Chief Executive,
                                                                                                                                                                                                                    To demonstrate its commitment to SSE’s approach             the CSO has been appointed to the SHEAC (see
              Accountability for the goals                                                                                                                                                                                                                                      opposite) and is a member of two of the three SSE
                                                                                                                                                                                                                    to sustainability, in March 2019, the Remuneration
              SSE’s Remuneration Committee agreed to align a significant proportion of executive remuneration to the achievement of those                                                                                                                                       Group-wide sub-committees of the Group Executive
business strategy addresses the challenge
                                     SSE’s business
                                           of climate
                                                      change  addresses
                                                               at its core.the
                                                                                          of four
                                                                                                      change addresses
                                                                                                               at its core.
                                                                                                                                   why our
                                                                                                                                         of  climate
                                                                                                                                             four fundamental
                                                                                                                                                     change  at its core. That’s why our four fundamental           Committee agreed to align a significant proportion
              four goals (see page 55) and SSE will report comprehensively each year against its progress in meeting its 2030 Goals.                                                                                                                                            Committee: Safety, Health and the Environment;
   business goals for 2030 are aligned with thebusiness
                                                  UN’s global
                                                               for 2030
                                                                      for sustainable
                                                                           are aligneddevelopment.
                                                                                       with the
                                                                                                 UN’s global
                                                                                                        goals goals
                                                                                                              for 2030for sustainable
                                                                                                                          are aligned with
                                                                                                                                            the UN’s global goals for sustainable development.                      of executive remuneration to progress against the
                                                                                                                                                                                                                    achievement of SSE’s new 2030 Goals. These goals            and Risk.
              Linking to the wider SDG framework
                                                                                                                                                                                                                    represent the most material contribution SSE can make
              SSE recognises that while long-term sustainability is dependent on the achievement of its material long-term goals, there remains                                                                                                                                 The CSO is also a non-executive Director of the
                                                                                                                                                                                                                    to the SDGs and chime with feedback given by both SSE’s
              further ways in which SSE can enhance the sustainability of its business. The remaining 13 SDGs provide a lens from which SSE can                                                                                                                                 Board of SSEPD, the subsidiary company which is
                                                                                          SSE’s    business       strategy      addresses       the   challenge       of  climate    change      at its core. That’sshareholders
                                                                                                                                                                                                                     why our four  andfundamental
                                                                                                                                                                                                                                         stakeholders. See page 55 for more
              assess these further social and environmental risks and opportunities. It therefore reports against additional SDGs material to its                                                                                                                               responsible for SSE’s networks businesses.
                                                                                                         business goals for 2030 are aligned with the UN’s global goals for sustainable development.                information.
              business (see page 15).

            Beyond the SDGs
            As well as integrating the UN’s SDGs into its business strategy and operations, SSE follows a number of other external best
            practice frameworks and benchmarks. It also actively seeks to improve its performance against environmental, social and
            governance (ESG) criteria commonly used by investors and other stakeholders. See page 15 for more detail.

            08             SSE plc Sustainability Report 2019                                                                                                                                                                                                                                           SSE plc Sustainability Report 2019   09
SSE PLC SUSTAINABILITY REPORT 2019 - For a better world of energy -

S U S TA I N A B I L I T Y    R E P O R T

                                                                                                                                                   Identifying material issues

                                                                                                                                                   EMERGING TRENDS
                                                                                                                                                     A path to net zero
                                                                                                                                                     The first and most significant trend in 2018/19 was the acceleration of evidence that supports a net zero carbon target in the UK.
                                                                                                                                                     The Intergovernmental Panel on Climate Change published their 1.5 degree report in November 2018, outlining the effect that
                                                                                                                                                     1.5 degrees of global warming will have on ecosystems and human lives. That report also described the relatively short window

                                                                                                                                                     of opportunity that exists to prevent global temperature rises of more than 1.5 degrees. This prompted a business coalition, which
                                                                                                                                                     included SSE, under the auspices of the Prince of Wales’s Corporate Leaders Group to urge the UK Government to pursue a net
                                                                                                                                                     zero target for 2050.

MATERIAL ISSUES                                                                                                                                      At the same time public campaigners, from naturalist David Attenborough to school pupils across the world, helped bring climate
                                                                                                                                                     change to unprecedented levels of international public concern. This was followed by the publication of the UK’s Committee on
                                                                                                                                                     Climate Change Net Zero Report in May 2019.

                                                                                                                                                     The combination of strengthened public sentiment and increased scientific evidence provides a powerful impetus for accelerated
The combined challenge of maintaining a secure and affordable supply of energy, while                                                                policy action through the early 2020s. SSE firmly supports the adoption of a net zero carbon target by 2050 for the UK and seeks
mitigating the impact of producing it – also known as the ‘energy trilemma’ – remains the                                                            to play a practical role in delivering the renewable electricity and grid infrastructure that will be required to achieve it.

most material challenge to SSE’s business and the energy industry as a whole.
SSE has mechanisms that allow it to identify further impacts it           SSE is also guided by international frameworks for sustainable
may have on society, the economy or the environment. Through              development and the increasing demand for environment, social              The Future of the Corporation                                         Ownership of electricity networks
monitoring trends in the external environment and engaging with           and governance (ESG) disclosure to ensure it is addressing and
its key stakeholders, SSE is able to identify material issues to its      reporting on the most material issues to shareholders and wider            In November 2018, the British Academy published                       The proposals by the Labour Party in the UK to bring
business and those with an interest in SSE and the wider industry.        society, and therefore creating value in a sustainable way.                its first tranche of research from its new international              electricity networks into state control have stimulated a
                                                                                                                                                     research and public engagement programme                              debate about the way in which the private companies
EMERGING TRENDS (PAGE 11)                                                                                                                            ‘The Future of the Corporation’. The aim of the
                                                                                                                                                     programme is to develop an evidence base that will
                                                                                                                                                                                                                           deliver in the public interest. SSE has sought to respond
                                                                                                                                                                                                                           constructively by working with stakeholders to provide
SSE tracks existing and developing trends in the external environment which may influence the way it seeks to meet its business                      serve as a foundation to redefine business for the 21st               evidence of the public interest delivered. While there is
objectives. These trends are not restricted to the energy sector alone, they extend to wider societal issues too. Tracking these trends              century and build trust between business and society.                 overwhelming evidence that GB consumers have benefited
can highlight challenges and opportunities for the business, its stakeholders and society as a whole, and allows SSE to prepare or                                                                                         from lower costs, higher reliability and better-quality service
respond appropriately.                                                                                                                               SSE believes this to be a hugely important piece                      following privatisation 30 years ago, SSE is proposing
                                                                                                                                                     of work and is supporting the programme as it                         progressive reform to the UK energy system. These reforms
WORKING WITH SSE’S STAKEHOLDERS (PAGES 12 TO 13)                                                                                                     progresses into a practical programme for action
                                                                                                                                                     that places the creation of social value at the heart of
                                                                                                                                                                                                                           should focus firmly on delivering fairness to consumers,
                                                                                                                                                                                                                           enable increased involvement of local communities and
Engaging constructively with its key internal and external               positive environmental, social and economic impacts.                        business purpose.                                                     ensure network companies contribute to local economies,
stakeholders is crucial to help SSE identify issues which are,                                                                                                                                                             pay employees fairly and pay taxes on any profits earned.
or are likely to become, material to the company or its                  Details of how SSE engages with its six core groups of
stakeholders. By identifying issues that are most material to            stakeholders and what issues are material to them can be found
its stakeholders, SSE is able to focus and prioritise decision-          on pages 12 and 13, alongside examples of specific issues
making within the organisation, allowing it to achieve more              engaged on in 2018/19 and how this impacted decision-making.                Flexibility first                                                     Offshore wind for UK benefit
MATERIAL RISKS (PAGE 14)                                                                                                                             With the transformation of local electricity grids proving
                                                                                                                                                     to be the key enabler of a localised, low-carbon energy
                                                                                                                                                                                                                           With the dramatic reduction in the cost of delivering
                                                                                                                                                                                                                           offshore wind farms, the sector is expected to play a
SSE’s Risk Management Framework and System of Internal Control allow it to manage and respond to 10 Group Principal Risks                            system, developments in 2018/19 have accelerated                      highly significant role in the UK’s decarbonisation, with an
identified for SSE, which outline the core uncertainties facing the company. Sustainability is considered to varying degrees throughout              this transition. An important principle of the newly                  increase from 8GW today to at least 30GW in 2030. At the
all of the Principal Risks, with specific sustainability-related issues, in particular climate change, being highlighted as influencing factors.     emerging ‘Distribution System Operator’ (DSO) role                    same time, communities across the country are, rightly,
                                                                                                                                                     is the significance of flexibility to accommodate                     expecting to secure some benefit from investment in
                                                                                                                                                     both new sources of electricity demand, like electric                 offshore wind farms. The UK Government’s mechanism for
GLOBAL FRAMEWORKS AND DISCLOSURE (PAGE 15)                                                                                                           vehicles, and new sources of electricity generation, like             stimulating this large-scale private investment mechanism
                                                                                                                                                     small renewable generators. In 2018/19, the electricity               is the ‘Contract for Difference’ and in 2019 an important
SSE is conscious that it does not operate in isolation and               to ensure it plays a part in addressing global challenges, thereby
                                                                                                                                                     network industry agreed to a principle of ‘flexibility first’.        deal was struck between the offshore wind industry and
considers the role its business plays in a national and international    enhancing the sustainability of its business and its capacity to
                                                                                                                                                     This means the industry will pursue ‘smart’ solutions to              the UK’s Department for Business, Energy and Industrial
context. Global frameworks provide SSE with a lens from which            create value over the long-term.
                                                                                                                                                     accommodate both enhanced electricity supply and                      Strategy. The objective of this Sector Deal is to build the
the company can address the issue of climate change and other
                                                                                                                                                     demand before implementing costly network upgrades.                   capability of the UK’s supply chain through an industry
material sustainability-related issues that face the business. They      The most important of these frameworks is the UN’s SDGs which
                                                                                                                                                     This is an important milestone in the development of the              investment of up to £250m, supporting better, high-paying
guide SSE to consider issues material to its business in a much          are designed to address some of the biggest challenges facing
                                                                                                                                                     smart grids the country will need in the future.                      jobs right across the UK.
wider societal and global sense, allowing it to focus its activities     humanity. SSE has aligned its 2030 Goals directly to them.

10          SSE plc Sustainability Report 2019                                                                                                                                                                                                   SSE plc Sustainability Report 2019          11
SSE PLC SUSTAINABILITY REPORT 2019 - For a better world of energy -
S U S TA I N A B I L I T Y       R E P O R T

Identifying material issues

SSE’S STAKEHOLDERS                                                                                                                                              CASE STUDY
                                                                                                                                                                Stakeholder impact on SSEN Transmission’s Business Plan                   on how the business plan improvements will impact the
Successful delivery of SSE’s strategy depends on constructive relationships with its stakeholders. By creating open, two-                                       SSE’S Transmission is business is currently developing its                GB consumer and not just the customers connected to
way channels of communication with stakeholders, SSE gains a deeper understanding of their perspectives to help inform                                          business plan for the RIIO-2 price control between 2021                   the north of Scotland network, which will be reflected in
decision-making and ensure it delivers the best outcomes for customers, shareholders and wider society.                                                         and 2026 that will be determined by energy regulator                      SSEN’s business plan. Furthermore, the User Group have
                                                                                                                                                                Ofgem. A key change in Ofgem’s approach to RIIO-2 is                      reinforced the critical nature of the north of Scotland
SSE’s stakeholders are people, communities and organisations with an interest in its purpose, strategy, operations and actions                                  the introduction of enhanced stakeholder engagement                       in decarbonising the electricity system across the
and who may be affected by them. SSE has six core groups of stakeholders – energy customers; employees; shareholders;                                           to inform network business plans. SSEN has welcomed                       whole of GB.
government and regulators; suppliers and contractors; and civil society, communities and NGOs. Meaningful engagement                                            this positive and constructive process and its ‘User Group’
with these stakeholder groups supports the ethos of Section 172 of the Companies Act 2006 which sets out that Directors                                         has provided significant influence on SSEN’s Emerging                     With many months of activity remaining in the process,
should have regard to stakeholder interests when discharging their duty to promote the success of the company.                                                  Thinking document.                                                        it is anticipated that the User Group will be key to SSEN’s
                                                                                                                                                                                                                                          ability to implement a business plan with stakeholder and
More details of the key stakeholder engagement undertaken at different levels within SSE, through both day-to-day and                                           The User Group has given highly instructive advice to focus               public legitimacy.
strategic activities, to inform decision-making and enhance Board understanding are set out in SSE’s Annual Report 2019,
pages 22 to 23, and 93.

  ENERGY CUSTOMERS                                    EMPLOYEES                                           SHAREHOLDERS                                         GOVERNMENT                                       SUPPLIERS                                         CIVIL SOCIETY,
                                                                                                                                                               AND REGULATORS                                   AND CONTRACTORS                                   COMMUNITIES AND NGOS

     SSE supplies and delivers energy and             SSE’s 20,000 employees have a direct stake in       SSE’s large and diverse shareholder base             Governments and regulators play a central        Building strong relationship with its supply      SSE works in partnership with third-
     related services to millions of domestic         the sustainability of its business. The effective   is increasingly focused on environmental,            role in shaping the energy sector. SSE works     chain, which consists of around 8,000             party organisations that bring specialist
     and business customers across the UK and         engagement of employees is also a powerful          social and governance (ESG) performance.             closely with them to help deliver an energy      suppliers and contractors, is crucial to SSE’s    perspectives on social, environmental
     Ireland, who all expect a quality service they   tool for improved business performance. SSE         As of 31 March 2019, more than one third of          system that supports achievement of              successful operation and to maximise cost         and energy- and business-related issues
     can rely on. Ensuring it provides an inclusive   seeks to be a responsible employer with the         SSE’s top shareholders were signatories to           long-term carbon targets and also works in       efficiencies.                                     on behalf of energy customers and wider
     service and meets the needs of its most          employee voice representing a core element          the International Investors Group on Climate         the interest of all energy customers.                                                              society.
     vulnerable customers is a priority for SSE.      of its people strategy.                             Change and are particularly focused on the                                                            Material issues
                                                                                                          governance of climate-related issues.                Material issues                                  – Fair expectation in the delivery of projects    Material issues
     Material issues                                  Material issues                                                                                          – Cost-effective decarbonisation                 – Management of health and safety risks           – Environmental protection and
     – Affordable and accessible energy               – Opportunities for development                     Material issues                                      – Fair treatment of customers                    on sites                                          decarbonisation
     – Responsiveness to need and vulnerability       – Flexible and family-friendly working patterns     – Financial performance                              – Security of energy supplies                    – Economic opportunities for local supply         – Customer vulnerability and fuel poverty
     – Quality customer service                       – Inclusion and diversity                           – Investment plans                                   – Economic impact of investments                 chains                                            – Employment standards including the
     – Using energy efficiently                       – The opportunity to have a say and make a          – Operational performance                            – Conduct of large businesses                    – Management of social and environmental          real Living Wage and the gender pay gap
     – Impact of industry change                      difference within SSE                               – Strategic direction of the company                 – Brexit and its impacts on industry             impacts                                           – SSE’s economic contribution and its
                                                      – Communications with employees in                  – Environmental, social and governance                                                                                                                  approach to tax
     Engagement                                       relation to issues such as Brexit                   (ESG) performance                                    Engagement                                       Engagement
     Proactive and continual engagement with                                                                                                                   SSE has dedicated teams who work to              SSE works with suppliers to ensure its            Engagement
     customers assesses the quality of service        Engagement                                          Engagement                                           communicate its business strategy and            values on issues such as environmental            Mature relationships with communities and
     provided and allows SSE to understand their      SSE undertakes ongoing, two-way employee            SSE maintains constructive and regular               investment decisions, and to assist the          protection, safety and modern slavery, are        NGOs are key in supporting SSE’s day-to-
     current and future needs. Key engagement         engagement to ensure it understands their           dialogue with shareholders to ensure their           development of regulation and policies           upheld throughout its supply chain. Key           day operations. Key engagement includes:
     includes: daily, real-time communication         opinions on the workplace. Key engagement           perspectives are considered in decision-             which impact on SSE and its customers.           engagement includes: supplier relationship        community consultations; seeking feedback
     through digital platforms, such as social        includes: structured career conversations;          making. Key engagement includes: regular             Key engagement includes: face-to-face            management with its strategic supply chain        on reports and initiatives; participation in
     media; targeted awareness-raising                working with trade union partners; all-             financial reporting; the AGM; investor               meetings; responses to consultations; and        partners; quality and health and safety           public events; and responding to surveys
     campaigns; and customer feedback forums.         employee engagement surveys; and                    roadshows; attendance at investor                    participation in working groups. SSE has a       audits; and onsite training.                      and consultations.
                                                      communication through internal channels             conferences; correspondence on specific              published Political Engagement Statement
                                                      such as the SSE app and employee                    matters on a reactive basis; and contributing        that sets out the standards it adopts when
                                                      conferences.                                        to ESG analyst profiles of SSE.                      engaging in advocacy with government and

 Example of 2018/19 engagement                        Example of 2018/19 engagement                       Example of 2018/19 engagement                        Example of 2018/19 engagement                    Example of 2018/19 engagement                     Example of 2018/19 engagement
 SSEN launched its Supporting a Smarter               Over the course of 2018, SSE Energy Services        Over the course of the year, many key                Engagement in 2018/19 highlighted a need         In early 2019, SSE issued a modern slavery        As a champion of the real Living Wage, SSE
 Electricity System report, which set out the         undertook extensive internal communications         shareholders engaged with SSE around its             for network companies to do more to              risk assessment questionnaire to its top          joined the Living Hours Steering Group and
 priorities and principles guiding the transition     around the then planned merger with npower,         management of climate-related risks and              demonstrate they are delivering in the public    strategic suppliers, of which the vast majority   conducted a number of joint consultation
 to DSO in 2017. In 2018, it published the            to keep employees up-to-date with changes.          opportunities, to gain a better understanding        interest, whilst being open to progressive       responded. SSE asked if appropriate policies      sessions with the Living Wage Foundation on
 results of its stakeholder consultation on the       The use of Yammer, a social network for             of this area of uncertainty.                         reform to deliver the decentralised and          are in place and if they undertake audits,        the issue of secure working hours.
 publication in its Your Response report.             employees, proved a particularly effective          Outcome for decision-making                          democratised low carbon system of the            training and risk assessments.                    Outcome for decision-making
 Outcome for decision-making                          internal communication tool.                        SSE has brought its key climate-related risks        future.                                          Outcome for decision-making                       SSE is taking part in the Living Hours pilot
 The consultation process has provided valuable       Outcome for decision-making                         and opportunities from its annual CDP Climate        Outcome for decision-making                      Modern slavery will now be added to the           which sets the standard on responsible
 feedback to help SSEN ensure the transition to       The Q&A sessions with senior leaders on             Change submission into its Sustainability            As a result SSE led number of consultations      agenda at the quarterly meetings between          working hour practices. It has committed to
 DSO works for all customers, including a desire      Yammer allowed the business to analyse              Report 2019, so the information is more              around RIIO reform, including around             SSE and these strategic suppliers, with a full    becoming one of the first organisations to
 for more transparency and removing barriers          employee comments and gather insight into           accessible to its shareholders. It has also linked   transparency and a position paper on fair tax,   annual update provided on progress.               gain Living Hours accreditation in the UK.
 for community-level projects.                        the sentiment around particular topics so           part of executive pay to progress in meeting its     to explore where network companies can go
                                                      communications could be tailored appropriately.     2030 Goals, aimed at tackling climate change.        further in meeting the public interest.

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SSE PLC SUSTAINABILITY REPORT 2019 - For a better world of energy -
S U S TA I N A B I L I T Y     R E P O R T

Identifying material issues                                                                                                                      Identifying material issues

MATERIAL RISKS                                                                                                                                   GLOBAL FRAMEWORKS
SSE’s 10 Group Principal Risks outline the core uncertainties the company must
manage and mitigate to meet its strategic objectives. Inadequate management of
risk can result in significant social, environmental or economic harm.
                                                                                                                                                 AND DISCLOSURE
                                                                                                                                                 SSE’s commitment to disclosing and communicating sustainability information
SSE’s Annual Report 2019 (pages 66 to 71) describes the Principal Risks in detail, along with its Risk Management Framework and                  coincides with the global trend that investors and wider stakeholders increasingly
System of Internal Control. This report, however, is concerned about the way in which social and environmental factors are considered            recognise the value of companies’ impacts beyond financial metrics. As well
within that process.
                                                                                                                                                 as allowing stakeholders to benchmark SSE’s performance and strategy, these
Whilst all the Group Principal Risks are relevant from a sustainability perspective, those with particular relevance are shown below             frameworks provide guidance to SSE on where it can create greater value for
within a green box.                                                                                                                              shareholders and society.
     Increased in materiality for SSE during 2018/19 		              No significant change in materiality for SSE during 2018/19                 Contributing to the UN’s SDGs
                                                                                                                                                 The UN’s Sustainable Development Goals (SDGs) are the primary framework SSE uses to report and guide its meaningful contribution
                                                                                                                                                 to sustainable development. While SSE contributes to many of the 17 SDGs, it believes it is more meaningful to report against the SDGs
     Commodity Prices: The risk associated with the Group’s                   Cyber Security and Resilience: The risk that key
                                                                                                                                                 that are most material to its business. See page 8 for information on SSE’s alignment of its business strategy to the four SDGs identified
     exposure to fluctuations in both the physical volumes and                infrastructure, networks or core systems are compromised
                                                                                                                                                 as highly material to the company and read more about SSE’s contribution to these SDGs on pages 16 to 59.
     price of key commodities, including electricity, gas, CO2                or are otherwise rendered unavailable.
     permits, oil and related foreign exchange values.                                                                                           As well, as the four highly material SDGs, SSE’s materiality assessment identified four other SDGs that are material to the company.
                                                                              Energy Affordability: The risk that the combination of
                                                                              the cost of providing reliable and sustainable energy and
     Development and Change: The risk of failing to recognise                 the level of customers’ incomes means that energy
     and react appropriately to competition, technological                    becomes unaffordable to a significant number of SSE’s
     advancements and stakeholders’ evolving expectations.                    customers. This risk is directly connected to political
                                                                              interventions and commodity price exposure.
                                                                                                                                                     Gender Equality                Reduced Inequalities            Responsible Consumption                         Life on Land
                                                                                                                                                     The energy industry            SSE operates across some            and Production                       The environment is essential
     Energy Infrastructure Failure: The risk of national energy               Financial Liabilities: The risk that funding is not available         is a traditionally male-        of the most remote places          SSE relies on various natural           in sustaining society and
     infrastructure failure, whether in respect of assets owned               to meet SSE’s financial liabilities, including those relating to   dominated sector. SSE must         in the UK and Ireland, and                                                SSE must actively manage
                                                                                                                                                                                                                      resources during construction
     by SSE or those owned by others which SSE relies on, that                its defined benefit pension schemes, as these fall due under       encourage more women IN,           believes it should promote           and operation of its assets.           any positive or negative
     prevents the Group from meeting its obligations.                         both normal and stressed conditions without incurring               ON and UP in its business           economic growth that              It must use these resources         impacts it has on ecosystems
                                                                              unacceptable costs or risking damage to its reputation.               to ensure women are              creates and shares value          efficiently to minimise waste             and habitats through
                                                                                                                                                  represented at all levels of      with people, communities            and adverse environmental                     its activities.
     Large Capital Projects Quality: The risk that major assets                                                                                          the company.                    and supply chains.                        impacts.                         Pages 62 to 63.
     that SSE builds do not meet the quality standards required to            People and Culture: The risk that SSE is unable to attract,               Pages 56 to 59.                   Pages 47 to 50.                 Pages 18, 19, 62 and 63.
     support economic lives of typically 15 to 30 years.                      develop and retain an appropriately skilled, diverse and
                                                                              responsible workforce and leadership team, and maintain            Becoming a signatory to the UNGC
                                                                              a healthy business culture which encourages and supports           In 2018/19, SSE became a signatory to the United Nations Global Compact (UNGC), the world’s largest corporate sustainability
                                                                              ethical behaviours and decision-making.                            initiative, committing to take action that advances societal goals. By becoming a signatory SSE commits to conducting its business in
     Politics, Regulation and Compliance: The risk from
     changes in obligations arising from operating in markets                                                                                    line with universal principles on the environment, human rights, labour and anti-corruption.
     which are subject to a high degree of regulatory, legislative
                                                                              Safety and the Environment: The risk of harm to people,            Investor demand for ESG disclosure
     and political intervention or uncertainty.
                                                                              property or the environment from SSE’s operations.                 There is growing demand from the investor community for increased disclosure from companies on environmental, social and
                                                                                                                                                 governance (ESG) performance. SSE’s disclosure of ESG performance allows it to communicate material issues to investors, and in turn
                                                                                                                                                 allows these investors to assess the level of risk their investment may be at. SSE engages with the ESG investor community through:
Sustainability in the Group Principal Risk context
Sustainability is considered throughout the Group Principal Risks, with specific sustainability-related influencing factors including:
                                                                                                                                                 •   Subject-specific investor questionnaires – SSE responds annually to questionnaires including: CDP Climate Change, Water and
zero tolerance of unsafe behaviour; government interventions and requirements around corporate governance and ethics;
                                                                                                                                                     Forest Programmes on how it manages these environmental issues; the Workforce Disclosure Initiative, on its management of
human rights and labour standards; inclusion and diversity in the workforce; public policies relating to energy affordability and
                                                                                                                                                     workforce related issues; and the Bloomberg Gender-Equality Index which benchmarks the top companies globally which are
the low-carbon transition.
                                                                                                                                                     committed to advancing women in the workplace.
Climate change is a core thread that runs through SSE’s business strategy. It therefore is a material influencing factor, to different
                                                                                                                                                 •   ESG analyst surveys – SSE actively engages with ESG analyst companies, including Vigeo Eiris, Sustainalytics and MSCI, to provide
degrees, on each of SSE’s Group Principal Risks. Most materially, climate change and the resultant geopolitical response to this, as
                                                                                                                                                     feedback and input into their ESG profiles of SSE.
well as impacting the environment, may influence Commodity Prices, Politics, Regulation and Compliance, Energy Infrastructure
Failure and the Energy Affordability Group Principal Risks. In response to both the influential role climate change has on the
company and in line with the Task Force on Climate-related Financial Disclosures, climate-related risks and opportunities are
                                                                                                                                                 Following best practice reporting guidelines
                                                                                                                                                 To clearly demonstrate SSE’s sustainability performance to its stakeholders, SSE follows best practice reporting guidelines and
outlined on pages 22 to 25 of this report. Finally, SSE’s new 2030 Goals are expected to provide a future lens from which the
                                                                                                                                                 requirements. This includes highlighting where its performance indicators meet Global Reporting Initiative (GRI) Standards for global
company can address the issue of climate change and other material sustainability-related issues that face the business.
                                                                                                                                                 sustainability reporting (see pages Pages 62 to 63) and also its performance in meeting the Non-Financial Reporting requirements of
                                                                                                                                                 the Companies Act 2006, which necessitate additional disclosure of non-financial impacts (see page 25 of SSE’s Annual Report 2019).

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