Group Chief Executives statement
During our first decade, we have made considerable strategic and financial progress and become a leader in sustainability.
When Carillion was launched as an independent company in 1999, we were primarily a UK construction company with around 13,000 employees. Today, we are a leading support services company with a substantial portfolio of Public Private Partnership projects and extensive construction capabilities. Despite the challenging economic climate, we delivered strong results in 2009 because we have a resilient business mix, supported by a high-quality order book and a healthy pipeline of contract opportunities. A growing contribution from our strong international business has added to the resilience of the Group. Our Middle East business in particular has achieved very strong growth, since our geographical diversification into Abu Dhabi has more than offset reduced activity resulting from the significant downturn in Dubai.
During our first decade, acquisitions have played a major part in our strategic development, notably Mowlem in 2006 and Alfred McAlpine in 2008. We have also disposed of numerous non-core businesses, the most recent being a consultancy business, Enviros, and our IT services business, both of which were sold in 2009.
Our sustainability programme has also changed significantly over the last decade. In 1999, we had a strong environmental improvement programme, which subsequently expanded to address our impacts on society and how sustainability affects our financial performance. We are proud that our strategy for sustainable development has been widely recognised as a leading example of how business can benefit by managing its impacts on society and the environment responsibly.
Today, 100% of our UK and Middle East operations have accredited environmental management systems, we are making reasonable progress towards our target of halving our carbon dioxide emissions and our partnership with Business Action on Homelessness goes from strength to strength. We also celebrated our 10th birthday by allocating a total of £25,000 to 50 good causes selected by our employees. These, and the other achievements detailed in this report, resulted in Business in the Community awarding us Platinum status in its 2009 Corporate Responsibility Index. As no other company in our sector has achieved this status, it confirms that we have made significant progress towards our objective of being the recognised leader in our sector in the delivery of safety and sustainability.
Having won The Sunday Times Best Green Companies award for large and medium-sized companies in 2008, we were disappointed to slip to 11th place overall in 2009. While 11th out of all the companies that took part in 2009 is still an excellent result, we are currently addressing the areas in which we need to do better, in order to improve our ranking in 2010.
In November 2009, we received an environmental prosecution, which related to a water pollution incident that took place in Derbyshire during severe rainfall in 2007. We have since reviewed our processes to prevent similar incidents occurring in the future.
We deeply regret that in 2009 there was one fatal accident in which Kenneth Campbell, a Carillion employee at a quarry in Scotland, was fatally injured when the vehicle he was driving overturned on the quarry haul road. No other vehicle was involved. Every accident is a personal tragedy and our thoughts are very much with the family and friends of Mr Campbell. Two prosecutions of Carillion companies by the Health and Safety Executive were completed in 2009. One of these related to an accident that occurred in the former Alfred McAlpine business, before it was acquired by Carillion.
In 2009, the Group’s Accident Frequency Rate (AFR) was 0.13 reportable accidents per 100,000 hours worked (2008 AFR: 0.14), with four out of five operational sites, worldwide, achieving ‘Target Zero’ (our corporate objective of eliminating all reportable accidents). The improvement we achieved in 2009, on an already relatively low accident rate in 2008, reflected our continuing and rigorous focus on reducing reportable accidents to zero. It is particularly pleasing to note that in 2009 the accident rates in our construction businesses in the UK and the Middle East reduced by around 40%.
We agreed five sustainability priorities for 2009, drawing on the advice of our sustainability committee:
Carbon emissions:
Working towards our target to halve our normalised 2006 UK carbon emissions by the end of 2010. We achieved during 2009 a 26% reduction against our restated baseline. Our 2009 performance compared to 2008 shows a 12% reduction in absolute emissions in one year. We are pleased to report that our MENA operations are now capturing and reporting its carbon footprint and have set a challenging reduction target for 2010.
Waste:
We signed the Waste & Resources Action Programme’s (WRAP) ‘Halving Waste to Landfill’ commitment, under which we have pledged to halve the construction waste we sent to landfill against 2008 levels by 2012. In 2009 we achieved a 12% reduction in waste to landfill against a 2008 baseline in our building business.
Sustainable procurement:
We aimed to achieve level 3 in the Sustainable Procurement Task Force Flexible Framework. Due to the problems and pressures created by economic recession, our supply chain teams were unable to dedicate the time needed to achieve this objective. However, progress was made, with 100% of our suppliers now accredited to Carillion’s standards, which include sustainability criteria.
Community investment:
For the eighth year running we donated at least 1% of our pre-tax profits, in cash and in kind, to community and other charitable organisations. We provided 107 work experience placements for homeless people or those at risk of homelessness, through the Business Action on Homelessness (BAOH) programme, which exceeded our target of 100 placements. Furthermore, I am extremely pleased to report that in 2009 we were able to offer full-time employment to 10 people on our BAOH programme and a further 16 of our candidates have been successful at securing full-time employment with other companies.
Apprentices:
We support the development of young people through our commitment to providing employment and training, for an average of 1,400 new apprentices every year. The total number of apprentices being employed and trained has remained stable at around 2,500, despite the economic downturn.
Looking forward, the main risks for our business are:
- > managing our pension schemes to ensure that scheme liabilities are within a range appropriate to our capital base
- > continuing to win orders in markets that are more competitive
- > the impact of the current global economic downturn on the financial stability of our customers, partners and suppliers
- > managing major contracts to ensure they are delivered on time, to budget and to the required standards
- > maintaining financial discipline.
We have measures in place to mitigate and manage these risks, as set out on page 16 of our Annual Report and Accounts.
Sustainability continues to be an integral part of our risk management strategy. Not only do we consider it our responsibility to tackle social and environmental concerns, but we also believe that this is good for our business. For example, our sustainability programme helps differentiate Carillion from competitors, enabling us to win work in our chosen markets.
During 2010, we will recast our sustainability strategy and set demanding objectives for the next decade. In doing so, we will ensure that we continue to tackle the main impacts we have on sustainable development, namely protecting the safety of our employees, contractors and local community members; reducing our direct carbon footprint; supporting local employment and economic development, notably through apprenticeships and Business Action on Homelessness placements; and delivering projects and services that delight our customers and create social and environmental benefits.
Finally, I want to acknowledge the contributions of two people who have been particularly influential in helping Carillion become a more sustainable business. David Hurcomb stepped down from our Board in 2009, having held responsibility for our sustainability programme for the last two years. David was committed to this programme and played a key role in establishing our carbon reduction strategy. Don Kenny is now the Executive Director with responsibility for our sustainability programme. Quentin Leiper, our Group Chief Engineer, was awarded a CBE in Her Majesty the Queen’s 2009 Birthday Honours List for his services to the sustainability agenda, both within Carillion and as former President of the Institution of Civil Engineers. Quentin has played a leading role in the development of our sustainability strategy over the last 10 years and, on behalf of everyone in Carillion, I should like to thank Quentin for his outstanding contribution and congratulate him on becoming a CBE.
I would welcome your feedback on any aspect of this report or our sustainability performance. Please send your comments to sustainability@carillionplc.com.
John McDonough
Chief Executive