Because of the nature of our business, sustainability is a key topic of conversation with many stakeholders. Last year, for our first Sustainability Report, we used our stakeholder engagement process to identify important ESG topics, which we focused on in our report. This year, we’ve evolved our approach to understanding our most important issues. We reviewed our issues through an impact lens, focusing on the most significant influences we have on the economy, the environment, and people. We then identified the top-scoring issues of this process as the most material topics for this year’s report. Our most material issues Stakeholders inform our approach We have also examined the results of our stakeholder engagement throughout the year as an important input into identifying and prioritising our most material issues. We use our analysis to help determine what information we should include in our Sustainability Report. How we prioritise This Report is guided by the Global Reporting Initiative’s (‘GRI’) approach to materiality. We aim to refine and strengthen this process in the future. 1 Identifying and curating our issues We monitored issues of importance through our regular stakeholder engagement, internal data, and media monitoring. In addition, we identified potentially material issues by assessing topics from relevant sustainability frameworks such as the GRI and Sustainability Accounting Standards Board (‘SASB’), sustainability megatrends as identified by the UN Sustainable Development Goals, Severn Trent’s Sustainability Framework and priorities, and through direction by our external agency. We organised issues by topic and sub-topics. 2 Scoring for likelihood and impact Guided by the GRI’s approach to prioritising impacts based on severity and likelihood, we scored each sub-topic on two scales: the likelihood of a positive or negative impact, and the scale of that impact. Each received a score from 1 to 5, reflecting our existing Enterprise Risk Management process. Each topic received a score totalling the scores of all its individual sub-topics. 3 Ranking and prioritisation We organised topics by aggregated score, and our internal working groups reviewed and validated the entire process and rank. Executive members of these groups included the Directors of Strategy and Regulation, General Counsel and Company Secretary and Customer Operations as well as senior managers across our business. Carbon and climate change How do we reduce carbon emissions while keeping our systems strong and resilient? Water resources for the future How do we ensure we all value our most precious resource? Skills and employment How do we establish the skills needed for the future of our business and support the wider creation of jobs? Enhancing nature How do we protect and nurture the ecosystem that protects and nurtures us? Supporting vulnerable customers How do we help our communities eradicate water poverty, and provide the support they need? Customers Investors Suppliers Regulators, Government and NGOs Colleagues Communities Our most material issues Customers Investors Suppliers Regulators, Government and NGOs Colleagues Communities Carbon and climate change How do we reduce carbon emissions while keeping our systems strong and resilient? Water resources for the future How do we ensure we all value our most precious resource? Skills and employment How do we establish the skills needed for the future of our business and support the wider creation of jobs? Supporting vulnerable customers How do we help our communities eradicate water poverty, and provide the support they need? Enhancing nature How do we protect and nurture the ecosystem that protects and nurtures us? Our customers are at the heart of our business. Our business plan is built on understanding and meeting their needs. Customers 32,000 customers engaged with our business plan 64% of our shareholder register have been engaged this year We see our investors as partners in moving our sustainability agenda forward. We want them to be proud to invest in us, whilst still receiving an attractive return. Investors 1,000+ suppliers have signed up to our Supply Chain Sustainability Charter Along with our employees, our suppliers support us in providing for our customers, and we recognise suppliers are key to achieving our ambitious sustainability commitments. Suppliers 7 regulatory bodies who engage with our board and management across the year We engage constructively with English and Welsh Governments, our regulators (Ofwat, DWI, EA, Natural England and Natural Resources Wales) and customer groups such as Consumer Council for Water to ensure the right outcomes for customers. Regulators, Government and NGOs Our experienced, diverse and dedicated workforce is key to achieving our ambitions and our purpose. Colleagues 8.3 out of 10 engagement score puts us in the top 5% of global utility companies Our aim is to be a force for good in the communities we serve and, in doing so, create value for all our stakeholders. Communities 95% of our colleagues live in our communities, giving us a uniquely strong connection to our region Moving and treating water is an energy-intensive process that results in greenhouse gas emissions, which contribute to climate change. If we’re to limit the dire potential of climate change, acting now is urgent and critical. The pursuit of low-carbon outcomes, combined with the recovery of the natural environment, set a powerful example of the kind of integrated solutions we need to adopt in rising to the twin challenges of global heating and nature decline. ” “ Tony Juniper Chair of Natural England The natural focus on economic activity and quick wins has meant an effective decarbonisation of energy, while other, trickier areas of emissions have received less focus. The new, ambitious targets for 2030 give the impetus to tackle those areas and shine a light on the sources of emissions across the sector’s supply chains, which will require joint action even beyond 2030. ” Howard Perry Severn Trent Energy Manager We’re working on it We’ve made our Triple Carbon Pledge – net zero operational carbon emissions, 100% renewable energy and 100% electric vehicles (where available in the market) by 2030 – as part of the combined UK water sector’s net zero 2030 road map. This gives us and the rest of the sector a shared goal. We’ve also committed to meet science-based emissions reduction targets which include working with our suppliers to measure and reduce emissions all along the value chain. We now self-generate the equivalent of 53% of the electricity Severn Trent Water uses, and procure all our imported electricity from renewable-backed sources. We’re also working in innovation partnerships, and with the rest of the water industry – at home and abroad – to find better ways to avoid process emissions while treating waste water and sludge. Net zero operational emissions by 2030 100% renewable energy by 2030 100% electric vehicles by 2030, where available in the market “ The challenges ahead We have to assess trade-offs between reducing emissions and the other environmental and societal consequences this may cause or hinder – it’s a question of balance. In time, emissions from our treatment processes will become a greater proportion of our footprint, as we reduce emissions from our energy use. We’re not alone: we need collaboration and action from our whole sector, governments and other industries. It’s a big challenge and one most people agree on. ← Go back to Our most material issues How do we reduce carbon while keeping our systems strong and resilient? How do we reduce carbon while keeping our systems strong and resilient? How do we reduce carbon while keeping our systems strong and resilient? How do we reduce carbon while keeping our systems strong and resilient? How do we reduce carbon while keeping our systems strong and resilient? How do we reduce carbon while keeping our systems strong and resilient? 0 1 2 3 4 5 6 7 8 9 0 0 1 2 3 4 5 6 7 8 9 0 0 1 2 3 4 5 6 7 8 9 0 0 1 2 3 4 5 6 7 8 9 0 0 1 2 3 4 5 6 7 8 9 0 0 1 2 3 4 5 6 7 8 9 0 % % Net zero operational emissions by 2030 100% renewable energy by 2030 100% electric vehicles by 2030, where available in the market Material issues in focus Carbon and climate change In the UK, hotter summers and what were previously once-in-a-lifetime heatwaves have become more common, and are predicted to continue. This is seriously increasing demand for water, especially during those hot periods, whether for agricultural, industrial or household use. Water stress – meaning insufficient resources for society’s needs – is on the horizon if we don’t act. Yet surely access to clean, drinkable water is a basic human right? It’s our business to provide that clean water. We work with the natural cycles to abstract the water people need, at the right time, from the right place. We need to ensure we do so at sustainable levels, and that’s key to our strategy. It means finding a balance – protecting levels of stored water and reducing what we abstract from certain areas. We also collect the waste water, clean it and return it to our rivers, keeping the cycle going. We can’t do it alone Yes, it’s our job, but we’re all in this together. We work with farmers and landowners, with communities and customers across all generations, to increase efficiency, reduce pollution, and enhance the quality of water in our catchment area. With their help, we manage catchments to ensure our supply is clean, we are investing in systems that reduce leaks, and we treat effluents so that what goes back into our rivers is as clean as possible. And we also Climate change and population growth mean that if we don’t take action now, in around 25 years water demand will exceed availability in many areas. But before we reach that point, the first thing to suffer is the natural environment, and we are already seeing this happen. Turning this around will require a society-wide effort. Water companies, Government, the Environment Agency, farmers and individuals have roles to play. ” “ The past year has taught us that there are many things we cannot take for granted, and that includes water. It’s easy to forget that every aspect of our lives depends on water, and we all have a role to play to protect this vital resource to ensure that there’s plenty of wonderful water for everyone to enjoy for generations to come. ” “ Emma Howard Boyd Chair of the Environment Agency Doug Clarke Water Resources Manager need our customers to play their part, which is why we’re working hard to help them reduce unnecessary consumption. We also work with other UKwatercompanies and governments, in regional and national planning to try to balance water demand and supply across catchments and between companies. We’re also helping with development of legislation that supports mandatory water labelling and minimum standards for building regulations. The challenges ahead Across the UK, climate change projections are for more frequent, more severe, more widespread, and longer-lasting droughts. Not only will that increase the need for agricultural irrigation, but by 2050 the UK is projected to be home to an extra 12 million people – all increasing demand on what could very well be a diminishing water supply. This could contribute to UK water shortages. This is why we are working on long-term plans within our area, and with partners regionally and nationally through Water Resource Regional Planning, to balance supply and demand needs. This planning takes into account population growth, the needs of commercial users, the needs of the environment, and the potential impacts of climate change. How do we ensure we all value our most precious resource? How do we ensure we all value our most precious resource? How do we ensure we all value our most precious resource? How do we ensure we all value our most precious resource? How do we ensure we all value our most precious resource? ← Go back to Our most material issues Material issues in focus Water resources for the future Only 10% of the UK water-sector workforce is under 24, while we expect 16% of the industry’s current skilled workforce to retire within a decade. We need to ensure we can always stay ahead of these industry issues, even though our current position is strong. We also need to address imbalances within our workforce, to ensure our talents are representative of our community. Without skilled people or a workforce in tune with the customers we serve, we cannot hope to succeed in our purpose – nor address the challenges ahead of us caused by the volatility that climate change. Here’s our take on it Now, more than ever, the role of employers is key to ensuring the future opportunities of young people and, in turn, the economic prosperity of their communities. Doing this is very much at the heart of how we run our business. So we’ve been focusing on creating work experience and job opportunities that can change the lives of young people across our region. We also recognise the business benefits and the basic moral duty of creating a workforce representative of our community – an ambition of ours. There is a shortage at every level. I think it’s the biggest risk to delivery of new infrastructure. The skills shortage is across the board, but it depends on the technologies. There is an ageing professional workforce and we need to increase the number of young people coming into the industry. ” “ We have a responsibility as a large employer to provide great careers, give back to our communities and play a leading role in skills regeneration. We have launched the Academy with this passion at the heart of our ambition. “ We can do our bit, but we recognise that building relationships and working with others is the way to confront the issue at a societal level. That’s why we’re delighted to be supporting the Government’s Kickstart Scheme, the #10000 Black Interns programme and building stronger relationships with schools and colleges, and working to offer careers guidance to our communities. In addition, our Green Recovery investments will directly create around 2,500 jobs in the Midlands at a time when employment, and getting people back into work, is vital for our region. David Rooke Executive Director of Flood and Coastal Risk Management Sarah Harris Head of Academy ” The challenges ahead Can we help improve the skills of our sector in line with the transition to a green economy? While we must take advantage of advances in technology, can we manage the effect of this on job roles? Are we prepared for the consequences of a retirement boom? Is our workplace an inclusive one that will help us recruit effectively? These are the questions we are addressing now, so we can answer in the coming years. How do we establish the skills needed for the future of our business, and support the wider creation of jobs? How do we establish the skills needed for the future of our business, and support the wider creation of jobs? How do we establish the skills needed for the future of our business, and support the wider creation of jobs? How do we establish the skills needed for the future of our business, and support the wider creation of jobs? How do we establish the skills needed for the future of our business, and support the wider creation of jobs? How do we establish the skills needed for the future of our business, and support the wider creation of jobs? How do we establish the skills needed for the future of our business, and support the wider creation of jobs? How do we establish the skills needed for the future of our business, and support the wider creation of jobs? ← Go back to Our most material issues Material issues in focus Skills and employment Nature plays an important role in how we manage our resources – when we look after nature, we look after water. Strong biodiverse ecosystems are the basis for our food and water supply chains. Yet biodiversity loss is accelerating across the world at an unprecedented rate, with the extinction of species and destruction of natural habitats. For us, the environment is vital to our supply of water, an essential partner to our reservoirs, treatment works and pipelines that capture, hold, clean and carry our water. Without nature, we couldn’t do our job. A flourishing environment plays an important role in helping us work more effectively and efficiently. There’s plenty we are doing... We have a rounded natural environment and biodiversity strategy. We’ve commissioned NGOs to carry out biodiversity audits on over 60 of our sites and are getting on with the recommendations. For land beyond our boundaries, we’re liaising with many partner organisations through our Great Big Nature Boost. We’re working with farmers and other landowners to make natural solutions integral to catchment management, both rural and urban. We’re also involving community groups and schools through our grants for biodiversity projects. Enhancing biodiversity helps build resilience in our natural ecosystems, boosting the health and quantity of several areas including woods, soils, rivers and wetlands... These enhancements will improve water quality and therefore make the vital resource more sustainable. ” “ ...and plenty more we can do To support our aspirations, we’ve expanded our ecology team and set up a working group to consider natural capital in different forms across the business. Natural capital assessment is central to certain incentives and is part of our regulatory Water Resources Management Plan (WRMP24). Zara Frankton Severn Trent Senior Catchment Management Scientist Sir David Attenborough A Life on our Planet, September 2020 To restore stability to our planet, we must restore its biodiversity, the very thing that we’ve removed. It’s the only way out of this crisis we’ve created – we must rewild the world. ” “ Zara Frankton pictured on the left The challenges ahead A legacy of farming, building and industry has degraded the UK’s natural environment heavily over centuries. As agriculture is a cause of biodiversity loss, our partnerships with farmers are vital. At present, nature-based solutions (the use of nature to provide environmental, social and economic benefits) are used only where it makes short-term economic sense – something that needs to change. In addition, the public are concerned about river water quality, something we need to work on alongside many other stakeholders. Emerging regulations (WRMP24 and others) set expectations for companies to plan for net environmental gain, incorporating natural capital valuations into their decisions, but definitions and methods are yet to be agreed. We’re working on it. How do we protect and nurture the ecosystem that protects and nurtures us? How do we protect and nurture the ecosystem that protects and nurtures us? How do we protect and nurture the ecosystem that protects and nurtures us? How do we protect and nurture the ecosystem that protects and nurtures us? How do we protect and nurture the ecosystem that protects and nurtures us? How do we protect and nurture the ecosystem that protects and nurtures us? How do we protect and nurture the ecosystem that protects and nurtures us? ← Go back to Our most material issues Material issues in focus Enhancing nature Water is essential to life. No one should have to worry about struggling to afford it. Yet over a million households across England and Wales spend more than 5% of their disposable income on water bills – the threshold for what is known as water poverty. And that was before the devastating economic effects of COVID-19. Our customers certainly believe water should be affordable for all, and we share that belief. What’s more, we’re their provider of this essential public service. And while some factors that affect affordability are not within our control – like the wider economy – some we can try to influence, and others we can change. Here’s what we’re doing Our approach – we call it ‘6 Levers’ – works in six different ways to help our vulnerable customers deal with water poverty: Providing financial support for customers who are struggling or just about managing, through our Big Difference scheme and social tariffs that can reduce up to 90% of our charge. Working with our customers to help them understand their bill and what they are paying for, and feel they are getting value. Making it easier for customers to pay, for example through budgeting schemes that work with their benefits payments. We know from our research that some customers continue to pay for their water and sewerage services even when they can only afford to do this by sacrificing other necessities such as heating, clothing and food. ” “ The Consumer Council for Water Affordability Review Mark Grice Severn Trent External Relationships Manager We know these are challenging times for our customers. Our own customer research tells us that 9% of them find water bills unaffordable, which is why we offer a range of schemes and services offering help to people who are struggling. Through these schemes, we can lower a customer’s bill to a more affordable level. It’s as important as ever that we look out for customers and let them know about the help we have available. ” “ Providing tips and guidance to help customers to reduce their usage. Optimising costs, so we offer some of the lowest bills in England and Wales. Ensuring our bills are fair. This year we’ve also been supporting our communities through our COVID-19 Emergency Fund, while targeting our Green Recovery proposals on relatively deprived areas. We also work closely with local authorities – such as our scheme in Coventry to provide financial support to care leavers, or in Leicester to help provide financial assistance through the Government’s Covid Winter Support Fund. Material issues in focus Supporting vulnerable customers The challenges ahead The lingering economic impacts of Covid mean many more customers are likely to need support in the coming years. Citizens Advice has estimated that six million UK adults have fallen behind on at least one household bill during the pandemic, and half of these have fallen behind on water bills. We’ll have to establish whether our social tariff schemes meet the potential short-term and long-term needs of the newly ‘water-poor’. 10%-90% reduction on our average bill through our Big Difference Scheme 9% of our customers find water bills unaffordable How do we help our communities eradicate water poverty, and provide the support they need? How do we help our communities eradicate water poverty, and provide the support they need? How do we help our communities eradicate water poverty, and provide the support they need? How do we help our communities eradicate water poverty, and provide the support they need? How do we help our communities eradicate water poverty, and provide the support they need? How do we help our communities eradicate water poverty, and provide the support they need? How do we help our communities eradicate water poverty, and provide the support they need? How do we help our communities eradicate water poverty, and provide the support they need? 0 1 2 3 4 5 6 7 8 9 0 0 1 2 3 4 5 6 7 8 9 0 0 1 2 3 4 5 6 7 8 9 0 0 1 2 3 4 5 6 7 8 9 0 0 1 2 3 4 5 6 7 8 9 0 % % % ← Go back to Our most material issues