Profile

“Our vision is to be the UK’s best integrated energy supplier and a world leader in renewables” is the opening statement of Scottish Power’s website, and with the announcement on February 20 that Scottish Power is to build the world’s largest commercial wave farm, its aspirations may not be that far flung.

The announcement comes as Briefing talks to Paul McKelvie – director of corporate responsibility at Scottish Power. “Good corporate responsibility is about virtuous circles,” says McKelvie. “It is about benefiting society but also benefiting the business.” The idea being that a wave farm not only helps the environment but it is also a profit-making investment. “Virtuous circles,” McKelvie adds, “create win-win situations.” So, the business wins and the environment does too.

The £10m wave farm, to be moored off the European Marine Test Centre in Orkney, will provide 3MW of green electricity by next year – this is enough to turn on the lights in 2,000 homes and not only provides an income for Scottish Power, but also reduces emissions and thereby helps the UK one step closer to its targets on tackling climate change.

McKelvie believes that this ‘value-for-all-parties-concerned’ approach is what gives the business a licence to operate in the long-term. Corporate responsibility is about “ensuring long-term shareholder value”, not just about “how much money is given to the community”. So, corporate responsibility, according to him, is firmly embedded in Scottish Power’s business strategy.

Scottish Power is an international energy company with operations in the UK and the US. It is listed on the London and New York Stock Exchanges and employs 9,793 people, and it is an integrated energy provider, which means it generates, transmits and distributes electricity “from the power station to the plug”.

MANAGING CORPORATE RESPONSIBILITY

To mainstream the corporate responsibility activities in the company, Scottish Power has divided its corporate responsibility strategy into ‘12 Impacts’. The impact areas were identified after in-depth consultation with stakeholders – from customers and staff, to suppliers and local communities.
They identified twelve main areas, which are affected by Scottish Power’s activities. These are:

1. Provision of energy
2. Health and safety
3. Customer experience
4. Climate change and emissions to air
5. Waste and resource use
6. Biodiversity
7. Sites, siting and infrastructure
8. Employment experience
9. Customers with special circumstances
10. Community
11. Procurement (suppliers)
12. Economic

Overall responsibility for corporate responsibility lies with Philip Bowman, chief executive of Scottish Power, and each of the twelve impact areas is overseen by an executive team member, who acts as the impact leader. The company’s executive team receives progress reports from the executive team impact leaders, and updates on strategy, management and reporting from the Corporate Responsibility Steering Committee, which is chaired by McKelvie. The committee is made up of senior managers, meets four or five times a year, and is responsible for driving the corporate responsibility agenda at Scottish Power by considering progress and advising on future actions. Any corporate responsibility related matters that come up when the committee meets is brought to the attention of the main board of directors by the chief executive and other senior executives.

The company believes that corporate responsibility performance should be managed in the same way as any other key business issue, and McKelvie adds: “There aren’t any stand-alone corporate responsibility activities – there is just the business. All the initiatives lie in the business and are done for the business. That is sustainable.”

REPORTING

In 2006, the company published its corporate responsibility report only on the web. This, says McKelvie, was done for three reasons:

• The reach of the information is much wider. So, more people can access areas that
  interest them.
  
• Linking information is easier. “We can take people across impact areas as well as to areas outside our own site that are relevant. This allows us to reduce reporting – we don’t
  have to repeat information that already
  exists elsewhere.”
  
• And, thirdly, to reduce the environmental impact created by printing thousands of copies of a paper report.

A PDF version of the 2005/06 is available on the web too, and the 2006/2007 report will be published online in June. McKelvie points out that the online reporting gives stakeholders the freedom
to engage with the company on an ongoing basis.

To support corporate responsibility reporting and management, Scottish Power is a member of a number of UK responsible business networks, including the London Benchmarking Group, Business in the Community (BITC) and the Corporate Responsibility Group. It is also accountable to regulators such as Ofgem, the Environment Agency, SEPA and the DTI.

STAKEHOLDER ENGAGEMENT

One of the areas identified by stakeholders as important was the impact energy providers have on the climate and the amount of greenhouse gases emitted by the industry (Impact 4 – climate change and emissions to air).

Renewable energy technology is vital for slowing down global warming but it does require stakeholder engagement as the development of wind farms – at present the most economically viable of the renewable energy sources – impacts hugely on local communities.

Scottish Power runs the largest wind farm in the UK – the Black Law wind farm in Lanarkshire. The wind farm is built on a disused opencast mine, which was a barren landscape with little biodiversity. But, according to McKelvie, the development of the farm has transformed the area’s biodiversity. Scottish Power embarked on a habitat restoration project last year to encourage biodiversity, especially with regard to birds and wildlife. The company works in consultation with the Lanarkshire Farmland and Wildlife Advisory Group, and the Royal Society for the Protection of Birds, and Scottish Natural Heritage are represented on a habitat management group at the wind farm.

McKelvie emphasises that more wind farms are needed for the UK to achieve its environmental and climate change objectives and by following examples set by developments such as Black Law, wind farms are changing the way energy is generated in Britain.

He feels that engaging NGOs is crucial to that process as “NGOs provide vital input right from the development stage of all our projects”.

“We do have disagreements but we also acknowledge where we went wrong and learn from it,” he adds.

So, stakeholder engagement is important to Scottish Power. “Stakeholders will influence the way we run our business,” says McKelvie. “We believe in a responsible approach to wind farm consultation. We engage the community [local NGOs and advocacy groups] from the beginning. It only takes one irresponsible developer to tarnish the reputation of the industry.”

Fuel poverty

A vital stakeholder for any energy provider is its customers and with this comes fuel poverty – defined by the Department for Environment, Food and Rural Affairs as “where a household cannot afford to keep warm”. The main cause, according to DEFRA, of fuel poverty in Britain is “a combination of poor energy efficiency in homes and low incomes”.

Scottish Power developed an impact area called customers with special circumstances (Impact 9) and has also set up a £3m trust fund – the Scottish Power Energy People Trust. The trust provides funds for not-for-profit organisations who work with people who are vulnerable or ‘fuel poor’. It is administered by Scottish Power but makes decisions independently of the company. Examples of projects that have received funding from the trust are the Glasgow Housing Association and Age Concern Sunderland – both of which received grants in December 2006.

“This is developing solutions [to fuel poverty] that are sustainable,” says McKelvie. The company believes that the establishment of a trust fund is a more long-term solution than simply helping people on an individual basis. McKelvie feels that Scottish Power is in a better position to help local organisations by offering resources and advice than by targeting individual customers who are not able to pay their bills. www.energypeopletrust.co.uk

COMMUNITY

The company not only engages the community with regard to the development of its renewable projects but also runs a number of community projects throughout its operations – focusing on employability and education with regard to public safety, science, energy efficiency as well as supporting the arts.

A significant programme that has been running for more than 10 years is Scottish Power Learning, which aims to improve the employability of young people and thereby supports the economic development of local communities.

Scottish Power Learning is a large-scale initiative that incorporates:

• School-based projects – which are aimed to aid the transition from school to working life;
• Community-based projects – that are designed to help unemployed young people in the community gain skills; and
• Work-based projects that provide young people with work experience and vocational opportunities – this is called the Skillseeker programme – as well as staff development opportunities that allow Scottish Power employees to contribute or volunteer with community causes.

PARTNERSHIPS

Scottish Power has partnered with a number of organisations across its business areas – from provision of energy, climate change and community, to procurement and waste and resource use. Examples are ScotAsh and Scottish Power’s initiatives to encourage investment in renewable energy as well as improving energy efficiency in the community.

ScotAsh: To minimise waste and carbon dioxide

Scottish Power runs ScotAsh in partnership with Lafarge Cement, the construction company. An unlikely partnership one might think but ScotAsh aims to minimise the impact of wasteful by-products, such as ash, by changing the ash into useful construction materials such as cements, grouts and stabilisation products, which can be used by Lafarge. In 2006, ScotAsh reduced the carbon footprint of Scottish Power’s operations by 40,000 tonnes and also meant that over 300 thousand tonnes of ash was not set to landfill.

Renewable energy: changing energy use in the community

In 2006, Scottish Power partnered with Bellway Homes, a UK house building firm.
The deal will see new homes built by Bellway at 200 sites across Britain, supplied with renewable energy and it is the largest deal of its kind in the UK. It obviously provides an income stream for the company but, at the same time, it is also beneficial for the environment.

A further way in which Scottish Power promotes the use of green energy is through its Green Energy Trust, which provides funding to renewable energy projects at a local level. The projects that receive funding must have an educational element, which teach communities about the benefits of renewable energy. For example, the trust granted £21,762 to Portlympne Wild Animal Park in Kent, UK, for the installation of a wind turbine, and £23, 412 was given to Longridge High School in Preston, UK, for a wind turbine in the school grounds. According to Scottish Power, renewable energy is part of the curriculum at the school and the turbine will provide a learning opportunity for engineering students.

So, Scottish Power manages its climate change impacts by partnering with local organisations and supporting their programmes.

POWER STATIONS

Partnerships at a corporate and community level are helping Scottish Power minimise its effect on the environment and promoting the use of alternative energy sources. But the power generation industry is the largest source of carbon dioxide emissions in Europe. So, how does the company face up to the fact that it is part of this industry?

McKelvie agrees that this is the case but stresses that Scottish Power is “trying to reduce the environmental footprint of our power stations by improving their fuel efficiency”.

To do so the company has invested heavily in CCGT (combined cycle gas turbine) power generation and is in the process of installing FGD (flue gas desulphurisation) equipment at its Lognannet power station. The £170m investment in FGD at the station will, according to Scottish Power, reduce emissions of sulphur dioxide by 90%.

Any new plants will incorporate CCGT technology and wind power. “We are the largest developer of wind power in the UK and once our wind farm at Whitelee, near Glasgow, is built, it will be the largest in Europe,” McKelvie adds. The first phase of the £330m project will be operational by next year and will power 180,000 homes when fully operational.

Scottish Power had also partnered with the Co-operative Group in 2005 to build a wind farm at Coldham in Cambridgeshire, which is now fully operational. It was the Co-op’s first venture into wind farm development and has reduced the amount of carbon dioxide released into the atmosphere by
35,000 tonnes.

SUPPLIERS

In order to provide electricity to millions, Scottish Power has a large number of suppliers globally. The procurement of wires and networking materials, insulation, and even coal, is a complex procedure – especially as Scottish Power considers social, environmental and safety issues of
utmost importance.

The company has partnered with Achilles – an organisation that provides Scottish Power with supplier management information. “Any supplier that we are thinking of taking on is tested against these standards and Achilles also checks that all suppliers adhere to these standards.” By utilising the expertise of Achilles in this area, Scottish Power believes it maintains high social, environmental and safety standards throughout its supply chain.

CHALLENGES AHEAD

Improving corporate responsibility performance

With all business success come challenges and McKelvie admits that there are “aspects of all twelve impact areas that can be improved” but that the company is forward-looking and has set itself “ambitious targets”. He does, however, feel that only setting long-term targets is not sustainable. “I think setting targets for every 5 or 10 years is more achievable.”

He feels that a specific area where the company can improve is in the communication of corporate responsibility internally – that is, to employees.

“The bottom line is that a truly responsible business is a business where an employee can be proud of working for Scottish Power. If they are asked on a Friday night who they work for, then they should be able to look that person in the eye and say ‘Scottish Power’”, McKelvie explains.

McKelvie plans to produce a flyer that outlines the main points of Scottish Power’s approach to corporate responsibility – “the non-financial side of the business, the part that wraps itself around the profit-making bit”. These would then be distributed to all Scottish Power employees.

Iberdrola S.A. offer

And then there is the takeover offer by Spanish energy company, Iberdrola, which was made in December 2006. The board stated that the combination of the two businesses will enable Scottish Power to “compete on a global scale in an increasingly competitive environment”.

The board has also added that the takeover will “create one of the leading European integrated utility companies and the leading wind generator” stating that the combined companies will be a competitive force in the UK and US renewables market.

The vote is still to take place as Briefing goes to press, with the board recommending that “shareholders vote in favour of the offer” when they meet on March 30.

TO CONCLUDE

Overall, McKelvie views Scottish Power’s outlook on corporate responsibility as one of balance: providing energy that is sustainable and affordable but also profitable.

“Switching off coal power stations right now may help the environment but it would also affect the security of energy supply, make energy less affordable, and many people would also lose their jobs. So, corporate responsibility is about reaching a balance.”

With all the changes lying ahead for the company, McKelvie and his team aim to keep this balance in mind.

Biography: Paul McKelvieA training and development professional, Paul has worked with Scottish Power since 1990, initially as training manager. Paul has also headed up Scottish Power Learning, an initiative that helps improve the employability of young people in the community. Paul was appointed corporate responsibility director in September 2005. In his role, Paul has responsibility for Scottish Power’s CR strategy, as well as the company’s corporate community programme. Since taking up the CR director role, he has been working hard to ensure that CR is aligned to the business’ long-term strategy. In 2005, Paul was awarded an OBE in the Queen’s Birthday Honours List for services to Lifelong Learning in Scotland.