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National Grid

Climate change and safety management

Home / EOS Case Studies / National Grid

National Grid is one of the world’s largest publicly listed utilities. It focuses on the transmission and distribution of electricity and gas in the UK and the US.

Background
The company is committed to building a long-term sustainable business. In recognition of the risks to its business from climate change, it has set ambitious greenhouse gas reduction targets to reduce its emissions by 45% by 2020 and by 80% by 2050, compared to levels in 1990. However, two major storms in the US in October 2012 and February 2013, as well as a number of smaller storms, had a material effect on its results, reducing its operating profit by £136 million (€155 million/$183 million) in the reporting year 2012/13. In addition, between 2009/10 and 2011/12, its lost time injury frequency rate rose from 0.15 to 0.18, with three fatalities occurring in 2011/12.

Our engagement
In 2012, we met the chair to discuss a variety of challenges facing the company, including health and safety issues and the lessons learned from hurricane Sandy. In 2013, we welcomed the news that the company’s safety, environment and health committee had initiated a review of its training and safety leadership initiatives. We challenged the board on how it ensures the integration of safety management in all its operations and were reassured by the answers given.

In 2014, at a meeting with board members, we discussed the company’s preparation for low-probability, high-impact events, as well as its work with trade unions to implement international health and safety standards in its US business. We followed up on these issues with the chair in 2015.

A year later, after an update on the company’s health and safety performance, we reviewed the benchmark data of its performance compared to its international peers. In 2017, in a meeting with the head of sustainability, we were encouraged by the actions the company has taken to improve the resilience of its network, to, for example, storms and flooding.

Changes at the company
Since 2012, the company has significantly invested in its US electricity infrastructure to improve resilience and help reduce the impact of service interruptions. These investments have included the fortification of substations in areas prone to flooding, the introduction of an aggressive vegetation management programme, the replacement of ageing infrastructure and investments in technology to better prepare for storms.

In the UK, the company has carried out a programme of flooding resilience work that will continue until 2021. In 2016, the company was able to report that despite numerous winter and summer storms in parts of New England and New York, its network held up well.

In 2016/17 the company had its safest year of performance ever, with the lost time injury frequency rate falling from 0.17 lost time injuries per 100,000 hours in 2012/2013 to 0.10. An external benchmarking exercise commissioned by the company demonstrated that this performance is among the best of its peer group.

 

 

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Bruce Duguid Bruce Duguid is a director at Hermes EOS and leads engagements with environmentally-exposed companies across the mining, oil and gas and utilities sectors, as well as corporate governance engagements in the UK. He is the lead author of the Institutional Investors Group on Climate Change’s 'Investor Expectations of Mining Companies – Drilling Deeper into Carbon Asset Risk’. Prior to joining Hermes EOS he was head of sustainability at the UK Green Investment Bank, where he spent four years working on the project to establish the bank and then building its sustainability function. Before working in sustainability, Bruce worked in corporate strategy as a management consultant at the Boston Consulting Group and as head of strategy at Visa Europe. He is also a qualified lawyer in England and Wales and holds a degree in Natural Sciences from Cambridge University.
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Engagement objectives

Environmental: Climate change resilience in operations, Greenhouse gas emissions targets

Social: Health and safety

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