Governance and risk

Effective corporate governance is the basis of how we do business. It provides confidence in what we are trying to achieve for the shareholders, customers, partners, suppliers and the communities within which we work.

Carillion has put in place comprehensive policies, management structures and processes that are applied rigorously to ensure that the company complies with the requirements of the UK Corporate Governance Code (September 2012). Furthermore, our Chairman and Company Secretary conduct a formal and rigorous annual evaluation of the Board, its committees, their procedures and performance. Read more about corporate governance in our 2014 Annual Report and Accounts (PDF 5.7 MB).

Managing sustainability

Our sustainability governance ensures our operations, targets and plans are managed and delivered in a consistent, responsible and transparent way. Richard Howson, Carillion’s Chief Executive, is responsible to the Board for sustainability, while Chief Sustainability Officer, David Picton, is accountable for sustainability across the Group. A Board Sustainability Committee has been introduced, chaired by Dr Ceri Powell, a Carillion Non-Executive Director, and is now in operation. This will provide oversight on behalf of the Board for priorities, targets and challenges material to the Sustainability 2020 Strategy and its management across the Group.

Our Board and Executive leadership teams are also advised by a Sustainability Advisory Committee, which includes directors from our business units as well as two independent external advisors – Dame Julia Cleverdon DCVO, CBE (Vice President of Business in the Community and Special Advisor to The Prince’s Charities) and Jonathon Porritt (Founder Director of Forum for the Future).

Philip Green was appointed to the Carillion Board in June 2011 and was elected Chairman in May 2014. Philip is also Chairman of both the Nominations and Business Integrity Committees. Philip was awarded a CBE in the 2014 Queen’s Birthday Honours List. He received the award for services to business and to charity in the UK and South Africa. Philip is the corporate responsibility advisor to the UK Prime Minister, David Cameron.

The operational delivery of the Sustainability 2020 strategy is overseen by the Group Sustainability Committee – which includes our operational Managing Directors, as well as key functional heads from our corporate teams. The work of these committees is underpinned by a rigorous set of policies, procedures and operational tracking processes to deliver business unit plans, each of which also has a steering group to track progress against Sustainability Leadership Plan targets.

Our sustainability management systems are fully integrated across the business. They govern our 2020 strategy, help provide assurance for clients and suppliers, and support risk management processes. All our operations in the UK, Middle East and North Africa are certified to the ISO 14001 international environmental standard, as is Carillion Canada’s Roads Maintenance division in Ontario.

Board of Directors

The Board reviews progress monthly. Richard Howson, Chief Executive, has Board-level responsibility for sustainability while Chief Sustainability Officer, David Picton, has overall accountability for sustainability across the Group.

Sustainability Advisory Committee

The Sustainability Advisory Committee makes recommendations to the Board. It is made up of representatives from our business units as well as two independent external advisors. See Independent Advisor statements.

Business Leaders Sustainability Committee

The Board also engages with the Business Leaders Sustainability Committee, which is chaired by the Chief Sustainability Officer and oversees the delivery of our 2020 sustainability strategy. The Chief Sustainability Officer implements the strategy via workstreams covering the six outcomes, interfacing with working groups in each of the business units.

Business Steering Group

Each of our businesses also has a steering group to track progress against Sustainability Leadership Plan targets.

Policy, procedures and management systems

Sustainability is embedded across the Carillion Group via a number of policies, procedures and use of our management systems, which are certified to OHSAS 18001 and ISO 14001. In 2012, we launched Capture, a web-based data collection system for each contract to report safety and sustainability progress. See Health and Wellbeing and Environmental Management.

However, the Board recognises that on their own policies and procedures are not enough and, in order to achieve consistently high standards of governance and service excellence, we have to ensure that our values are at the heart of everything we do. Our values are helping to shape the culture, character and beliefs of our business. For more information on our values visit About us.

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Our Board Sustainability Committee

Dr Ceri Powell was appointed to the Carillion Board as a Non-Executive Director in April 2014. Ceri is a member of the Audit, Remuneration, Nomination and Business Integrity Committees and Chair of the Sustainability Committee. Ceri is also a member of the Advisory Board of the United Nations Sustainable Energy for All initiative, chaired by the Secretary General of the UN, Ban Ki-moon.

From 2015, Dr Powell will chair a new Board Committee for Sustainability, set up to assess strategic issues, the delivery and future development of Carillion’s sustainability outcomes and advising on:

  • sustainability strategy, values and policies;
  • annual sustainability report;
  • annual management report from our sustainability auditors;
  • sustainability legislation and regulations; and
  • engagement with internal and external stakeholders on sustainability.
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Remuneration

In 2014, the Chief Executive’s objectives included, ‘to lead the Group’s health and safety and sustainability strategies and aim to deliver continuous improvement in performance’.

Our target is to achieve by 2020 a £40 million contribution to profit as a result of our sustainability programme. It is also one of our Chief Executive’s annual bonus targets, sitting alongside other social, environmental and governance measures to create a balanced sustainability programme.

Our policy is to ensure that remuneration and other benefits attract, motivate and retain Executive Directors and senior managers of the calibre required to achieve the Board’s objectives, including economic responsibility and growth in shareholder value. Our remuneration policy is derived from our strategic objectives, which specifically include achieving leading standards of sustainability, health and safety, environmental and social performance.

We aim to ensure that pay is fair, consistent and appropriate to our culture and community. For our full statement and more details on remuneration, see our 2014 Annual Report and Accounts (PDF 5.7 MB).

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Shareholder relations

We welcome and encourage engagement with shareholders. Our contact details are available on our website. The Board and senior management team communicate regularly with our shareholders through:

  • our Annual Report and Accounts;
  • our half-year report;
  • regulatory announcements;
  • presentations and site visits;
  • meetings with current and prospective shareholders; and
  • our Annual General Meeting.
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Risk management

The Board is ultimately responsible for ensuring that the Group’s risk management systems are suitable for identifying and evaluating significant sustainability risks. Alongside our legal obligations and anti-corruption measures, we invest in integrity with our rigorous business integrity policies and procedures. Managing social, environmental and ethical risks is also an integral part of delivering contracts successfully.

We evaluate risk at every stage, from initial thought processes to assessing how suppliers and subcontractors are likely to perform through our supply chain management safeguards. For our people, risk management is practical and structured but also a reflection of their attitudes. We use the following processes to manage risk correctly:

  • independent, external auditors review financial controls and other business systems to ensure they are operating effectively;
  • peer reviews are carried out within each business unit by teams of impartial representatives from other parts of the business empowered to ensure compliance with comprehensive guidelines;
  • all our people are encouraged to raise genuine concerns about malpractice at the earliest possible stage, including a confidential ‘whistleblowing’ hotline; and
  • robust anti-bribery and corruption policies. (PDF 95 KB)

See below for our table of sustainability-specific risks.

Building a successful business

Sustainability risk Mitigation
  • Reduction in public spending on construction contracts
  • Potential growth in our services business as governments look to subcontract work to help deliver cost savings
  • New business opportunities in sustainable products and services – with new and existing clients
  • Difficulties operating in existing or new overseas regions and markets where there is potential for political unrest or change
  • Employing people with appropriate experience when tackling new markets and regions
  • Deploying high-quality project directors in new regions
  • Ensuring that key joint venture partner relationships are managed at the highest level in Carillion
  • Carillion employees involved in allegations of bribery or corruption, leading to potential prosecution and damage to reputation
  • Bribery and governance policies for all senior management and operational teams, backed up by specific, targeted training
  • Volatility affecting price predictions for the duration of a contract
  • Hedging against price increases, assessing scope for risk mitigation or sharing and continuing to focus on optimising cost efficiencies

Leading the way with our customers and suppliers

Sustainability risk Mitigation
  • Losing or failing to win contracts as a result of poor customer service
  • Winning and retaining contracts through our proactive service and sustainable products
  • Reputational damage by association with a supplier with poor sustainability performance
  • Working with suppliers to enhance their sustainability performance and continuing as a funding partner to Supply Chain Sustainability School
  • The financial stability of our customers, partners and suppliers
  • Applying rigorous selectivity criteria in relation to financial stability, security of project funding and contractual terms and conditions; provision of Early Payment Facility
  • Failure to support local and SME businesses, resulting in loss of work with public sector organisations and lack of diversity in supplier base
  • Targets set for local and SME spend; SME charter and support through initiatives such as Supply Chain Sustainability School

Providing better prospects for our people

Sustainability risk Mitigation
  • Moral, legal and financial risks through accidents or incidents to our people or subcontractors
  • Continue to embed, develop and enforce our best in class health and safety standards and practices across our business
  • Employee dissatisfaction, leading to a reduction in retention and our ability to deliver on contracts
  • Great Debate survey and follow-up actions to deliver upon feedback given
  • Risks to health and wellbeing among our people, affecting their welfare and ability to perform their roles
  • Providing opportunities for a better work-life balance through flexible working and ‘Health Like Safety’ campaign
  • Lack of diversity among employees not reflecting customer base
  • Investment in diversity programmes, action plan, targets and advisory programmes such as Business in the Community’s Opportunity Now
  • Lack of compliance with local labour laws, appropriate welfare and human rights standards, evolving anti-slavery legislation and employment practices
  • Ensure that our HR and procurement policies, guidance and practices adhere to the International Labour Organisation’s core conventions, align with international ISO standards and regional laws, and can align with Carillion’s values
  • Recruiting and retaining key people throughout our businesses
  • Address key issues arising from employee engagement; using the Carillion Leadership Programme as a pipeline for future leadership talent

Supporting sustainable communities

Sustainability risk Mitigation
  • Reputational damage in the communities where we work, leading to a reduction in repeat business
  • Enhancing our reputation in the community with a strategic programme of investment in sustainability and community engagement
  • Youth unemployment and skills shortages
  • Ensuring a future pipeline of skilled individuals through our education and training programmes, plus our commitment to national initiatives such as YourLife in the UK
  • Safeguarding when working with young and vulnerable people
  • Increasing awareness on safeguarding through training available to employees
  • Failure to understand our clients and local community requirements and to respond to them
  • Tailoring our community needs plans and programme delivery to suit the local needs and appropriate expectations

Enabling low-carbon economies

Sustainability risk Mitigation
  • Trailing behind the market for low-carbon products and services
  • Innovate and launch services that deliver financial and carbon savings to clients
  • Climate change impacts affecting our business
  • Continued commitment to climate change mitigation and business continuity plans to mitigate localised regional risks
  • National carbon targets being set
  • Continued commitment to carbon reduction and minimising our footprint
  • Increase in costs as energy costs increase
  • Investigate and invest in appropriate renewable energy opportunities and other means to optimise energy security

Protecting the environment

Sustainability risk Mitigation

Biodiversity:

  • Failure to comply with local legislation or contract biodiversity requirements

Biodiversity:

  • Building mutually beneficial partnerships with organisations such as The Wildlife Trust to develop environmental management policies, backed up by specific, targeted training and systems for managers and operational teams

Waste to landfill:

  • Financial implications as costs rise
  • Reputational risk of not taking enough action to tackle waste

Waste to landfill:

  • Reduce costs by diverting waste and assess scope to realise value from waste
  • Increase engagement with key stakeholders and advisory groups to target an effective zero waste to landfill and minimise waste overall

Resource management:

  • Loss or decline of resources needed for our business, specifically timber and water, and consequent price rises

Resource management:

  • Building mutually beneficial partnerships with organisations such as the Forest Stewardship Council (FSC-UK)
  • Investigate and invest in appropriate alternative resource use

Pollution prevention:

  • Prosecution for failure to comply with local legislation

Pollution prevention:

  • Environmental management policies, backed up by specific, targeted training and systems for managers and operational teams

Ethical sourcing:

  • Purchasing products and materials that haven’t been responsibly and ethically sourced
  • Lack of waste recycling facilities in some of our Middle East operations and geographical dispersal of our operations in Canada

Ethical sourcing:

  • Timber strategy and policy through WWF Global Forest & Trade Network, targets and evidence for local spend with small and medium enterprises, alignment to UK Flexible Framework principles
  • Investigating opportunities to create the infrastructure to support our operations in these areas, or to partner with appropriate specialist organisations
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Connecting industry and Parliament

Carillion’s Chief Sustainability Officer David Picton was appointed Commissioner to the Industry and Parliament Trust Sustainability Commission in September 2014. The Commission explores how business and governments can work together to promote more sustainable business practices.

CSR Label

Al Futtaim Carillion has recently been accredited with the Dubai Chamber CSR Label award recognising our commitment to operating responsibly.

Chairing the Board Sustainability Committee is an important opportunity to make sure that Carillion’s award-winning sustainability progress to date remains ambitious and relevant. Resilience and balance will become ever more fundamental to responsible and forward-thinking businesses.”

Dr Ceri Powell, Carillion Non-Executive Director

Carillion plc, Company No. 3782379. Registered Office: Carillion House, 84 Salop Street, Wolverhampton WV3 0SR. Place of Registration: England and Wales

Copyright 2015 Carillion plc

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