The ESG Committee is comprised of non-executive directors of the Company appointed by the Board and met three times during 2021. The ESG Committee invites the Chairman, Chief Executive and a number of other senior executives to attend its meetings to discuss and monitor progress on the ESG issues including objectives and targets. Progress of the Company’s net zero programme is a standing agenda item. The ESG Committee reports in writing to the Board about Company progress on ESG on a quarterly basis. The ESG Committee supports the Board in overseeing the progress of the executive in ensuring that the Company takes an integrated, strategic approach to addressing climate transition risks and opportunities.
During 2021, the ESG Committee’s terms of reference were revised to include climate transition to reflect our focus on moving towards net zero. During 2021, the Board received a briefing from an external expert on carbon and climate-related issues and our intention is that such sessions will be repeated going forward in order to ensure the Board remains fully informed about these issues.
Another key role of the ESG Committee is to approve ESG-related objectives and targets which form part of the executive directors’ incentives. In 2021, delivery of the next phase of the net zero plan was included within the non-financial element of the executive directors’ objectives.
The Board is informed by climate change-related issues when setting its overall strategy. During 2022, the ESG Committee will agree net zero milestones with the Company to sustain and accelerate progress.
During 2021 the members of our Executive Committee (EC) were set bonus-related objectives in support of our net zero initiative including supporting the development of business sector-specific net zero roadmaps.
The Company has robust processes in place to identify, evaluate and manage all risks including those arising as a result of climate-related issues. Risk, including climate-related risk, is a regular agenda item at Board meetings and the Board review risk as part of its annual review process. This, together with regular reports from the ESG Committee provides the Board with an appreciation of the key risks (and potential opportunities) as a result of climate-related issues and oversight as to how those risks are being managed.
Environmental performance including climate-related risks and opportunities are monitored via the Risk Management Framework which includes our Operational Assurance Statement, Lifecycle Management Performance Review, Integrated Business Plan, Quarterly Business Review and Chief Executive Business Review processes. Our Operational Framework provides a robust governance structure, policies and processes that manage climate-related risks and opportunities across the Group. Risk is reviewed by both the EC, Audit Committee and the ESG Committee.
Our EC receives regular updates and briefings on our net zero agenda. During 2021, to reflect our commitment to sustainability and climate change, the EC approved changes to the Group Strategic Framework and operational governance system. The purpose of these changes is to embed climate change into our group strategy such that it becomes fundamental to how we do business.
Day-to-day responsibility for environmental issues, including those related to climate, and our net zero programme sits with our Group ESG, Culture and Business Transformation Director. She is part of the EC and attends the ESG Committee meetings and gives regular updates on our environmental and net zero programme.
She is also the owner of our Environmental Policy, which details our commitment to addressing environmental impacts related to our products and activities including climate-related issues. The net zero working group and SHE team report to her and she monitors and receives regular reports on progress. During 2021 we incorporated climate transition into our Group-level Environmental Policy and created a governance, reporting and planning roadmap to achieve net zero. During 2022, this roadmap is being embedded across the Group to help further support a focus on climate-related issues in decision making across the business. We will also establish a Sustainability Council, reporting to the Group ESG, Culture and Business Transformation Director, to support the Company’s strategy, recommending to the EC areas of sustainability to be given priority and focus for the forthcoming year and supporting Line and Functional leaders in the implementation of the Company’s sustainability programme.
We have also established a cross-functional, net zero working group made up of functional representatives, business leads and environmental specialists. This group reports into the Group ESG, Culture and Business Transformation Director and coordinates the progression of our net zero ambitions for the Group.
As required by our Environmental Policy we have an environmental management system (EMS) in place for all of our businesses. Short- and long-term environmental, including climate-related risks, such as those outlined below are built into the businesses’ EMS. Part of the EMS process is to define issues and set appropriate targets for the reduction of environmental and climate change impacts and risks.