Throughout this annual report, we provide examples of how we: take into account the likely consequences of long-term decisions; build relationships with stakeholders; understand the importance of engaging with our employees; understand the impact of our operations on the communities in our region and the environment we depend upon; and attribute importance to behaving as a responsible business. The board appreciates the importance of effective stakeholder engagement and that stakeholders' views should be considered in its decision-making. More details on stakeholder engagement can be found in Delivering our purpose.

Statement by the directors in performance of their statutory duties in accordance with S172(1) Companies Act 2006

The board of directors of United Utilities Group PLC consider, both individually and together, that they have acted in the way they consider, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole and having regard (amongst other matters) to factors (a) to (f) S172 Companies Act 2006, in the decisions taken during the year ended 31 March 2020 including:

Acceptance of the final determination

A key decision taken during the year was the acceptance by the UUW Board of Ofwat's final determination (FD) of the 2020–2025 business plan. Whilst some concessions were made in our decision to accept the FD, the directors believe that in doing so:

  • There will be a long-term beneficial impact on the group and all of its stakeholders, giving the company the certainty needed to deliver a better quality, more reliable water and wastewater service for customers in the North West of England to 2025 and beyond. We will continue to operate our business within tight budgetary controls and in line with regulatory targets providing particular benefits to customers in relation to affordability, and recognising those more vulnerable customers. In accepting the FD, we recognised the extensive engagement undertaken with customers, enabling us to gain an understanding of their views and priorities, communicating and listening through new channels and underpinned by working with the independent customer challenge group YourVoice (see Delivering our purpose). We are working to enhance our operational resilience through both investment and innovation (see Our business model);
  • Closely related to the acceptance of the FD was the board's approach to setting the company's dividend policy for the same period (see Chairman and Chief Executive Officer's review). As the board of directors, our intention is to behave responsibly toward our shareholders and treat them fairly and equally, so they too may benefit from the successful delivery of our plan. As part of the group's dividend policy, we have committed to continue to share the gains of outperformance with customers and shareholders.

COVID-19

The business implications of the COVID-19 pandemic have been fast moving and uncertain but the directors consider that the decisions made will be in the best long-term interests all the company's stakeholders:

  • We have committed to helping those customers who have been affected by COVID-19 and are having difficulty paying their bills at this time. We are giving those customers the option to request a three-month payment holiday and we have widened the eligibility for our 'Back on Track' social tariff for an initial interim period to 2020/21 and 2021/22. To support local communities, £3.5 million has been donated to our Trust Fund to make sure that financial support is available to as many customers as possible who are struggling to pay their bills due to a change in their income (see Our performance in 2019/20). Money is also given to debt advice charities;
  • We aim to act responsibly and fairly with our stakeholders and engage with them to gain an understanding of their needs. We have been engaging with our supply chain to get a better understanding of the financial difficulties that many are experiencing, and have committed to temporarily altering payment terms with suppliers in the short term, paying them within seven days where possible to assist with their cash flow. In some cases, we have agreed to a number of temporary concessions to contractual terms to address changes to working practices, to ensure suppliers can recover additional costs they have incurred where appropriate (see Our performance in 2019/20);
  • We took the decision that we would not use the government's furlough scheme and that we would continue to support all our workforce throughout the situation, as we believe this is the responsible approach of an organisation like ours. We have established a Staff Outreach Scheme under which employees facing financial hardship because of COVID-19 (perhaps due to a family member losing their job or having their earnings reduced) can apply for financial assistance from the company;
  • Recognising the difficulty being experienced by many customers in our region, all members of the board volunteered a 20 per cent reduction to their salary/fees for three months, with the money instead being shared with organisations supporting those in the front line helping communities cope with COVID-19;
  • We believe these actions are in line with our culture and the high standards of business conduct and good governance we set ourselves (see Delivering our purpose and Our business model).

Employees

  • We continue to be a responsible employer in our approach to employees, ensuring we communicate and engage with them regularly in a variety of ways and that the voice of the workforce is heard and taken into account when making decisions. We recognise our employees are fundamental to the long-term success of our business. Their health, safety and wellbeing is one of our primary considerations in the way we operate and the support we provide to them (see Our business model);
  • We provide rates of pay that exceed the voluntary Living Wage that applies to our region, along with a range of benefits including company-funded healthcare for employees at all levels;
  • More than 99 per cent of our current employees are members of one of our two pension schemes, along with around 14,000 former employees. We have £4 billion of pension assets under management. The board approved the decision to accelerate the payment of the remaining deficit repair contributions (totalling around £126 million) in 2019, meaning that the pension scheme has minimal reliance on the company in order to meet all of its liabilities. As a result, customers and shareholders are protected from significant exposures to future potential pension scheme deficits (see Maintaining a secure pension position for employees);
  • Employees throughout the business participate in the annual bonus scheme, ensuring a shared focus on the performance of the business plan. The directors' remuneration policy provides that: the executive directors will normally receive a salary increase broadly in line with the increase awarded to the general workforce; the performance measures for the annual bonus align with the company's key strategic goals for the year, reflecting predominately financial and operational objectives; and for the long-term plan, the measures are 50 per cent on the Return on Regulated Equity (RoRE) and 50 per cent on a basket of customer measures.

Carbon commitment

  • By its very nature, the long-term success of our business is reliant on long-term planning, particularly in relation to the environment and climate change. In line with the UK's commitment in the 2008 Climate Change Act, we have committed to achieving science-based targets to reduce our emissions. As part of our climate change mitigation strategy we have made a series of pledges to deliver these targets and to setting further targets across our full value chain, including transitioning to using 100 per cent renewable energy by 2021 and a 100 per cent green fleet by 2028 (see Our approach to climate change).