Overview

Climate change has been a subject of strategic and operational focus for us for over two decades. The impact of the environment on our activities, and the impact of our activities on the environment influences how we deliver water and wastewater services to customers. Our response to climate change focuses on its two component parts:

Adaptation – we have used scenario analysis in our business planning and risk management since 1999 to ensure we adapt and improve our resilience to effects of climate change. Our approach to enhancing the resilience of our service is based on Systems Thinking which enables us to look at individual elements of a bigger system and how they interact with the other constituent parts in any given scenario.

Mitigation – we seek to minimise our contribution to climate change by reducing greenhouse gas emissions, especially through our energy and land management strategies, in line with reduction targets first set in 2006. Our contribution to limiting climate change comprises six company-specific pledges.

This is supported by clear and effective governance, strategy, risk management, metrics and targets.

Decades of understanding and responding to climate change

Climate change and the resultant shifts in weather patterns have the potential to significantly impact our operations and the broader environment and ultimately the long-term viability of the water and wastewater services we provide. Hazards such as droughts, floods, storms or heatwaves will continue to become more frequent and more intense. At the same time, we need to decarbonise our operations and limit the amount of greenhouse gases we emit. The illustration below summarises some key activities we've undertaken since 2000 to manage both.

TCFD Chart

Adapting service to a changing climate

Our first climate change adaptation report in 2011, and the second in 2015, highlighted over 100 climate change risks, focusing our strategic planning on the most significant physical risks. Our next adaptation report will include an increased focus on transitional risks.

Over the last eight years, we have adopted a Systems Thinking approach which enables us to forecast how changes in weather conditions will impact us in a predictable way. It allows us to understand how areas of our service are vulnerable to climate change and adapt our plans to improve performance and resilience across key service areas; for example, water supply, leakage, sewer flooding and pollution.

Systems Thinking enables us to adapt to climate change over multiple time horizons. In our Water Resource Management Plan (WRMP), climate data is embedded in over 1,000 scenarios to understand how we can create the right supply demand balance against significant uncertainty for the next 25 years.

A similar baseline risk and vulnerability assessment is being taken as part of our Drainage and Wastewater Management Plans (DWMPs) to understand future performance compared to a baseline. This will identify where we are at risk of failing to meet strategic planning objectives such as internal flooding or wastewater treatment works compliance.

In the shorter term, flooding and droughts have become more prevalent across the North West and they are the forerunners to longer-term climate change impacts. Operationally, Systems Thinking enables us to use big data including weather forecasts to predict demands week to week and set out our system appropriately to manage this – which, despite these extreme weather events, has supported delivery of some of our best performance.

Our contribution to mitigating climate change As part of our strategy and commitment to decarbonisation we have been tracking and publishing our greenhouse gas emissions since 2001. Our most recent target, set in 2015, was to reduce our greenhouse gas emissions by 50 per cent from the 2005/06 baseline by 2020 (and to achieve a 60 per cent reduction by 2035).

Our contribution to mitigating climate change

As part of our strategy and commitment to decarbonisation we have been tracking and publishing our greenhouse gas emissions since 2001.Our most recent target, set in 2015 was to reduce our greenhouse gas emissions by 50 per cent from the 2005/06 baseline by 2020 (and to achieve a 60 per cent reduction by 2035).

Our greenhouse gas emissions since 2005/06(1)

TCFD Gross greenhouse emissions Chart

Carbon dioxide

Methane

Nitrous oxide

Reported emissions

50% reduction from 2005/06 baseline

(1)Our greenhouse gas emissions are consistent with scope 1, 2 and 3 as detailed in Our approach to climate change.

(2)The significant reduction in greenhouse gas emissions between 2017/18 and 2018/19 was due to the purchase of a large proportion of our electricity from certified renewable sources. As a result, in 2018/19 we switched from the location-based accounting method to the market-based method to report our headline emissions. (see Our approach to climate change for more details).

As part of our mitigation strategy, we have outperformed our target, reducing emissions by 73 per cent since 2005/06. Through this strategy we have embedded greenhouse gas emission impact assessments in our project appraisals and financial approvals processes and signed up to the ambitious industry-wide Water UK Public Interest Commitment to achieve net zero emissions by 2030.

Supplier Engagement Leader in 2019 badge

Transparency and disclosure

We are committed to transparency and regularly publish carbon and climate change disclosures. For over a decade, we have participated in CDP's Climate Change Programme assessment, where we have been ranked in the top 3 per cent of companies globally and recognised as a Supplier Engagement Leader in 2019.

In addition to our CDP submission, we report in adherence with the Greenhouse Gas Protocol Corporate Accounting and Reporting Standards (2015) and the Science Based Targets Initiative (SBTi).

We have signed the Statement of Support for the Financial Stability Board's Task Force on Climate-related Financial Disclosure (TCFD) which was published in June 2017, and we report in line with its recommendations across its four thematic areas.

Governance

Chief Executive Officer Steve Mogford has the highest level of responsibility for the group's preparedness for adapting to climate change and driving our mitigation strategy. Russ Houlden, Chief Financial Officer, has executive responsibility for risk management, a large part of which relates to climate change. Non-executive directors have a collective responsibility to challenge constructively and monitor the delivery of the risk and control framework set by the board, as described in the Corporate governance report.

We have a strong track record of risk management and disclosure of climate change and we continually mature our understanding of the risks. The table below summarises progress over the last investment cycle (2015–20) and sets out plans for the coming year.

Governance

Progress (2015–20):

  • CEO led engagement with executive team to deliver required standards in managing climate change risks and opportunities through our existing governance structure (see Corporate governance report);
  • Executive led improvements to governance of climate change – achieved 'leadership level' in 2019 CDP governance category; and
  • Carbon valuation appraisal model and guidance included across capital approval processes and governance.

Plans (2020/21):

  • Executive oversight of required enhancements to attain an overall top score across all categories for the 2020 CDP assessment.

Risk management

Progress (2015–20):

  • Identification and alignment of climate change risks and opportunities into company risk management framework;
  • Completed robust review to identify which corporate risks would be influenced by climate change; and
  • Published the risks identified as being particularly sensitive to climate change.

Plans (2020/21):

  • Further formalisation of climate change physical and transitional risks into corporate risk framework and integration into risk management systems.

Strategy

Progress (2015–20):

  • Set out AMP7 performance commitments with financial incentives for air quality and natural capital (see Our business model);
  • Water resources and flood models including climate scenario analysis, informed by CP09 forecasts;
  • Published our second adaptation report, in 2015, outlining our holistic, integrated and partnership approach to a changing climate;
  • Climate change resilience explicitly set out in our PR19 business plan;
  • Strategic commitments and pledges made for emissions reductions; and
  • Recognised as a Supplier Engagement Leader by CDP in 2019.

Plans (2020/21):

  • Whole life costing and investment appraisals changes, with prioritisation to include variable carbon pricing;
  • Company-wide climate-related scenario analysis;
  • Publication of a climate change adaptation progress report (2020) which will include a review of climate risks in line with Defra's categorisation for adaptation;
  • Implementation of climate change resilience plans (physical and transitional) in AMP7; and
  • PR24 strategic planning to include climate mitigation pledges and long-term climate projections.

Metrics and targets

Progress (2015–20):

  • Achieved highest mark 'leadership level' in 2019 CDP assessment of targets and emission reductions initiatives;
  • Step change in maturity of understanding our GHG emissions; and
  • Refreshed climate change mitigation strategy to deliver science-based targets and carbon commitments and pledges.

Plans (2020/21):

  • Review scope 3 emissions for consistency with the GHG protocol principles to set a science-based scope 3 target by 2021;
  • Manage scope 3 emissions as part of our 'United Supply Chain'; and
  • Establish tracking and reporting against our climate mitigation strategy commitments.

1st

comprehensive report covering the TCFD recommendations

TCFD Logo

Governance

Strategy

Risk management

Metrics and targets

The TCFD has four core elements under which it recommends organisations report on their approach to climate change.

Corporate Citizenship Review

The text of our TCFD disclosure was reviewed by Corporate Citizenship, a leading sustainability consultancy, to ensure that it accords with current Task Force on Climate-related Financial Disclosures best practice.