SSE PLC SUSTAINABILITY REPORT 2019 - For a better world of energy - SSE.com
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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
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
36 INDUSTRY, INNOVATION AND INFRASTRUCTURE
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
PROVIDING THE ENERGY
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
66
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
S U S TA I N A B I L I T Y R E P O R T
Chief Executive’s Introduction
EMBEDDING SUSTAINABILITY
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
sustainability@sse.com 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
STRATEGY
Strategic overview
Strategic overview
S U S TA I N A B I L I T Y R E P O R T
OUROUR
VISION,
AVISION,
PURPOSE
PURPOSE
SSE's business explained SSE's business explained
FOCUSING ON THE SUSTAINABLE VISION,
AND AND
LOW-CARBON TRANSITION STRATEGY
STRATEGYAND STRATEGY
PURPOSE
Vision:
To be a le
Purpos
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
presents
a leading growth
significant
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
andwith
strategy
prevailing
align with
sectorprevailing
and policy
sector
trends.
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
whichdiscipline
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
greaterthat
thanare thegreater
cost ofthan
capital,
the cost
enhances
of capital,
earnings
enhances
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,
operating,Creating
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.
roomsEarnings
of its strategic
derivedon
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
strategy
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
itofisGroup
these revenue, and itand
developing,
is these operating and At the verythe
developing,
owning heart ofthat
operating
assets SSE’s
and
experience
create
owning the SSEassets
has inthatDecarbonisation
low-carbon
create technologies offers SSE the
fairly busin
SSE remains focused on providing market-leading businesses that are bestbusinesses
place to seize
thatthe electricity
areopportunities
best place to seizenetwork businesses
the opportunities
lasting value and are vital strategy
lasting
to thevalueis aand
commitment
low-carbon are transition. toItlow-carbon
vitalremunerates
to the has shareholders opportunity
transition.
for Ittheir to put its
has continued assets,
faith and Unite
customer service and delivering efficiency savings presented by decarbonisation
presented
andbyelectrification.
decarbonisation
are welland electrification.
place world-class assets, a coveted
to seize the world-class
develop,pipelineassets,
of opportunities,
operate aand
coveted
investment.
own pipeline
and As ofwas
opportunities,
seenskills
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
and
project
sectordevelopment,
that experiencecaninalso
create lasting project
createdevelopment,
substantial value to finance
in creating lastingfurther
value. SSE Throu
Changes to SSE’s business Changes
structure
to SSE’s
implemented
business from
structure implemented procurement,
from construction
procurement,
management, To beinvestment
construction
operations,amanagement,
leading energyfor company
growth
operations,
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
strong2019
focushaveforcreated
individualstrong
business
focus for individual
customer
businessservice and finance
customer
that service
enhancesandvalue
finance
contribute
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
units
value.
andInclear
particular,
visibility
SSE
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,
consolidating
operation
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
underearnings.
known
a single It
as SSE has the largest
entity to be known
An increased
as SSE investmentAn for low-carbon
appetite
increased electricity
energy
for low-carbon
investment appetiteforassets
tomorrow.
electricity
SSE makes for alow-carbon and environmental
significant electricity value forit
contribution to the economies low-c
Renewables. This new model
Renewables.
also gives new installed
Thisgreater
model to renewable
focus alsothe capacity
gives greater focus
assetstopresents
the presents
opportunities
assets to opportunities
presents
form new
opportunities
financialto form
operates
to form
in bynewpaying the
financial
the societies
right amountitofoperates
tax, at thewithin.
right
specific requirements ofspecific
SSE’s Distribution
requirements across
andof the UK andand
Transmission
SSE’s Distribution Ireland,
Transmission
partnerships new
valuefinancial
and the and create partnerships andpartnerships
from successful and
createdevelopment
value
time,from
in thesuccessful
right place. SSEmakes
believes
development
SSE creating
significant value for
economic
networks businesses, wh networks
ich are vital
businesses,
low-carbongeneration
wh ich are vitalcapacity
enablers. connected
low-carbon and
enablers. create
operation of assets.and fitsvalue
with afrom
Thisoperation of Strategy:
strategysuccessful
assets. of
This
contribution
developing
fits with atostrategy ofsociety
the countries is theitfoundation
developing
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
renewables
businesses and
are
networks businesses
capital
network in the north of Scotland recycling
are will
development
and operating, but not always
and operating,
continue
capital
assets. to
recycling
be an
andnot
wholly owning
but operation
important
will
assets.
always
sustaining
owning
continue
committing
feature
to
of and
Timely
and
wholly
operating
be
to anto
creating
important
tax
which
assets.
energy
quality
transparency,
feature
value
Timely
jobs,
and related
to
can
paying
supporting
shareholders.
be
fairdelivered
wages,
infrastructure in a
indigenous
for
BUSINESSES BUSINESSES BUSINESSES complemented by thermal complemented
vital flexibility complementing
generation plant
vital flexibility
by thermal
the variability
that provides
complementing
generation plant that realise
provides
is almost entirely renewable.
of renewables
value from development
the variability of renewables
realise value
SSE can add value from SSE
whilefrom
operations
can addand
value
retain
from
sustainable
retaining
development
key
supply
options
stakes
operations
transition
way.
chains
while
for to
so retaining
and
and delivering
a low-carbon
key stakes
retain options
infrastructure
economy.
for
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
low-carbon
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
provide
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
androutes
whichto secure
market
valuable
for SSE’s
routes to market for SSE’s
Growth could also come Growth
from areas
couldbeyond
also come
SSE’sfrom
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
#4
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
deployopportunities
– with strict capital
to deploy
discipline
– 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%
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directly aligned to the
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at the for their
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at the and time as addressing
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social development. Goals.
aim is to
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was seen
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TB2018/19, successful transactions
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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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]
lasting
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.
STRATEGY
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
Help
Cutaccommodate
our carbon Treble
Help renewable
Cutaccommodate
our carbon Treble
Champion
Help renewable
accommodate
Fair Tax and Treble renewable
Champion Fair Tax and Champion Fair Group Tax and strategy. The GEC also monitors the operational
10m
intensity
electricby
vehicles
50%
intensity by 50%
10m energy
intensity
electric output
byvehicles
50% 10m energy
a real
10m electric vehicles
electric
Livingoutput
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
electricity
carbonnetwork
intensity of Reduce the carbon intensity of
Develop
Reduce
Build theand build
electricity
carbon by 2030
network
intensity of Be Develop
the
Build
leading and Build electricity network
build
electricity
company by 2030
network
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
electricityand
generated
infrastructure
by 50% that
by enough renewable
electricity
flexibility and
generated energy
infrastructure to
by 50%that
by andenough
flexibility renewable
Irelandandchampioningenergy
infrastructure to
Fairthat
Tax enough
and Irelandrenewable energy
championing Fairto
Tax relation
and Ireland championing to sustainability matters.
Fair Tax
els, helps
2030,accommodate
compared to 2018 10 million
levels, electricity
treble
2030,
helps generated
renewable
accommodate
compared to output
2018 by
to 50% byhelps
10 million
levels, treble
and flexibility
arenewable
Livingoutput
accommodate
real Wage.and
to infrastructure
10 million treble that
and renewable
a real Livingoutput
Wage.to
enough renewable energy to
and a real Living Wage. and Ireland championing Fair Tax in which the organisation’s principal sustainability role
electric
to around
vehicles
150gCO /kWh.
in GB 2by 2030. 2030, tocompared
electric 30TWh
around
vehicles
150gCO GBto2/kWh.
ainyear. by2018
2030. levels,electric vehicles
helps
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
strategy
change addresses
at its core.the
That’s
challenge
why
SSE’s
our
business
of four
climate
fundamental
strategy
change addresses
at its core.
the
That’s
challenge
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
goalsgoals
for 2030
for sustainable
are aligneddevelopment.
with the
business
UN’s global
goals goals
for 2030for sustainable
are aligned with
development.
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
STRATEGY
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
IDENTIFYING
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
S U S TA I N A B I L I T Y R E P O R T
Identifying material issues
WORKING WITH
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
regulators.
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.
12 SSE plc Sustainability Report 2019 SSE plc Sustainability Report 2019 13
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).
14 SSE plc Sustainability Report 2019 SSE plc Sustainability Report 2019 15
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