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Performance during the year
Responsibility
We continue to enjoy external endorsement of our responsible business approach. We are ‘sector leader’ of the multi-utilities sector of the Dow Jones Sustainability World Index and one of only two companies listed. We also continue to feature in the FTSE4Good Index and are one of 29 companies regarded as a ‘Platinum’ company in the Business in the Community 2006 Corporate Responsibility Index, confirming that our approach to responsible business is indeed world class.
Climate change
We have committed to reduce our own greenhouse gas emissions by 60% in advance of the target date of 2050 set by the UK Government. Against our independently verified baseline, to date we have achieved an approximate 35% reduction. The derivation of our baseline is included in the responsibility section of our corporate website.
Last year we reported on our website for the first time our greenhouse gas emissions in line with the World Resources Institute greenhouse gas protocol initiative. This provides a breakdown of our direct emissions (Scope 1), for example methane leaking from our gas distribution networks, indirect emissions resulting from purchased electricity (Scope 2) and other indirect emissions (Scope 3). We believe this provides greater transparency and focuses attention on those emissions over which we have the greatest control.
Almost 100% of our reported Scope 3 emissions are due to losses on our electricity transmission and distribution networks. These losses are dependent on the distance between the location of electricity generators and centres of demand, a factor that is outside of our control. Emissions associated with these losses should be reported as Scope 1 emissions by electricity generators using the protocol.
For our US operations prior to 2006/07, we were unable to separately identify emissions due to methane leakage from our gas distribution network from other apparent losses due to such things as metering and billing error. We therefore reported conservatively and included all as Scope 1 emissions. This resulted in overstatements of our emissions prior to 2006/07. We have now identified a methodology which separately identifies methane leakage and therefore have restated years 2004/05 and 2005/06 accordingly. A detailed explanation, together with a comparison with previously stated Scope 1 and 2 emissions, can be found on our website under GHGbaseline.
During 2006/07, our Scope 1 and Scope 2 greenhouse gas emissions amounted to some 4.3 million tonnes CO2 equivalent, compared with 4.8 million tonnes in 2005/06 and 7.3 million tonnes in 2004/05. Our Scope 3 emissions during 2006/07 amounted to some 5.1 million tonnes CO2 equivalent, compared with 5.0 million tonnes in 2005/06 and 4.5 million tonnes in 2004/05.
Total Scope 1 and 2 emissions per £million of revenue amounted to some 471 tonnes CO2 equivalent compared with 521 tonnes in 2005/06 and 867 tonnes in 2004/05.
Our largest direct emission is methane leakage from our gas distribution networks, accounting for some 57% of our Scope 1 emissions. During the year, we replaced approximately 1,850 kilometres of old cast iron pipes in the UK, the largest source of these emissions.
Historically contaminated land
In the UK, National Grid Property manages land contamination issues on 350 currently owned sites previously used for gas production. In the US, we have responsibility for approximately 200 historically contaminated sites, the vast majority of which are formerly owned manufactured gas plants. During 2006/07, 17 sites in the UK were remediated and 18 sites in the US were remediated or closed with no remediation required.
As described under Legal and related matters, a case is before the House of Lords regarding a former gas site which was not part of the assets that formed part of the gas privatisation in 1986 and therefore has never been owned by National Grid. We remain convinced of our case that National Grid has no legal liability with respect to this or other former UK gas sites which did not form part of the assets we acquired at the time of privatisation and believe that our position will be upheld by the House of Lords.
Protecting the environment
Over 90% of our employees now work to certified ISO 14001 environmental management systems.
The number of significant environmental incidents in 2006/07 arising directly from our operations was 40, which includes 20 contractor-related incidents. In 2005/06, there were 23 incidents, of which 1 was contractor-related. Incidents outside of our control resulting from third party or weather-related damage to our networks were 13 compared with 25 for 2005/06. There were no prosecutions by enforcing bodies resulting from these incidents. In the US, we received 9 environmental citations in 2006/07 compared with 10 in the previous year. Of these, 2 in the US attracted fines totalling $4,885 (£2,550).
In our 2006 employee opinion survey, 73% (2004: 72%) of respondents considered National Grid acts responsibly in all its business dealings, including environmental management.
Electric and magnetic fields
We recognise there is some scientific evidence suggesting certain adverse health effects may be linked to electric and magnetic fields. There is also evidence linking an increased risk of certain diseases to proximity to power lines, though the cause of this is not clear. As a consequence, there is public concern and we take these issues very seriously. The balance of evidence remains against both power-frequency and radio-frequency electric and magnetic fields causing ill health. The World Health Organization has classified power-frequency magnetic fields as ‘possibly’ carcinogenic. Our public position statement on electric and magnetic fields, which we review annually, helps set the framework within which we continually assess the scientific evidence in this area, determine any implications for the way in which we conduct our business and explain to society what the science is telling us. We actively support high-quality research and open communication and in the UK we initiated and supported the Stakeholder Advisory Group on electric and magnetic fields, which reported its assessment of the issues in April 2007. This group represents a more constructive and less confrontational way of handling issues such as electric and magnetic fields, and its assessment brings greater clarity on the issues involved for society as a whole. This assessment is available at www.emfs.info/sage.
Corporate governance
Our corporate governance performance during the year is described in Corporate Governance.
Business ethics
In March 2007, we published our Standards of Ethical Business Conduct, replacing our UK Code of Business Conduct and with the intention of replacing our current US Standards of Conduct on completion of the planned KeySpan acquisition, thereby providing a single set of standards throughout National Grid. The new standards provide a common set of practical guidelines to help ensure that our behaviours are lawful, we comply with our policies and licences and we follow the values set out in our Framework for Responsible Business and our core values of respect, integrity and ownership. In 2006/07, there were 7.98 substantiated breaches per 1,000 employees compared with 4.76 in 2005/06 and 8.04 in 2004/05. Offences include such things as internet and email abuse and misuse of company vehicles and other assets. Disciplinary actions can range from a verbal warning to dismissal.
In our 2006 employee opinion survey, 65% (2004: 56%) of respondents considered something would be done if they reported an inappropriate business practice or an ethical issue, while 65% (2004: 61%) believe National Grid is a good company for customers to do business with.
Human rights
A review in 2004 of potential human rights risks highlighted the need to better understand our increasingly international supply chain. To improve control in this area, we have worked with other UK utilities to develop the UK's utilities vendor database supplier pre-qualification programme to include labour-rights related questions - this was introduced in 2006. A complementary approach is being developed for our US operations. To further strengthen controls, we have also carried out an assessment of the full range of materials and services purchased by our worldwide operations and identified those most likely to pose human rights risks to our operations. In 2007/08, we will further develop our purchasing strategies and processes to manage these potential risks. We continue our work with the Business Leaders Initiative on Human Rights, an international business-led initiative aimed at developing practical business tools to incorporate human rights into day-to-day business decision-making.