Power & Utility survey

F O C U S

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P O W E R

A N D

U T I L I T I E S

S E C T O R

K P M G s
I n t e r n a t i o n a l
S u r v e y o f
C o r p o r a t e
S u s t a i n a b i l i t y
R e p o r t i n g 2 0 0 2

G l o b a l

S u s t a i n a b i l i t y

S e r v i c e s

T M

2002 KPMG LLP, a UK limited liability partnership, and the UK member firm of KPMG International, a Swiss nonoperating association. All rights reserved.

Power & Utility survey

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Introduction

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Page 1

Since the publication of KPMGs International Survey of Environmental Reporting in 1999, there has
been significant change in the number, scope and quality of reports1 produced by companies. The KPMG
2002 International Survey on Corporate Sustainability Reporting shows that reporting is now becoming
mainstream for big corporations, with 45 percent of Global Fortune Top 250 companies now publishing a
report. The focus of these reports is slowly shifting from the inclusion of only environmental performance
to combined environmental, social and economic reports (i.e. sustainability reports), and an increasing
number of reports are being externally verified. Companies are also adopting new approaches to
reporting, such as web-based reports, developing reports for specific stakeholder groups or issues, and
preparing shadow accounts that incorporate social and environmental costs.
In todays business environment, companies are facing increasing pressure to make the right financial
decisions while demonstrating their legitimacy and sustainability. Stakeholders are also becoming
increasingly concerned about the way in which decisions are made, and are asking for greater
accountability and involvement.
There are still many companies, for whom sustainability is not a core business issue, but a compliance
with legislation or nice to have accessory with little business relevance. However, companies included in
KPMGs 2002 survey (hereafter, the main survey) report that embracing sustainability can enhance
business performance in many ways, including:
Reducing operating costs and improving efficiency
Developing innovative products and services for access to new markets
Improving reputation and brand value through integrity management
Recruiting and retaining excellent people
Gaining better access to investors capital
Adding to the value of the company through the financial markets appreciation of good
sustainability performance
Reducing a companys liabilities through integrated risk management.

This Power and Utilities Sector briefing report highlights the results from the main survey that relate to
this sector, and compares the performance of power and utilities companies to that of the global corporate
world. Graphics presented in this report may differ slightly to those presented in the main survey.
The aim of this report is to offer an insight into the current trends in reporting within the power and
utilities sector and, together with the results of KPMGs main survey, to provide convincing material
regarding the importance of Sustainable Development.

Survey methodology

The main survey focused on the state of reporting for the following companies:

The Global Top 250 companies from the Global Fortune 500 (hereafter, the GFT250)
Top 100 companies in 19 countries2 (1,900 companies)

The Top 100s database included 101 power and utilities companies and the GFT250 included 19.
In order to obtain a more complete and global picture of the state of play in this sector, additional
analysis was conducted for this briefing report on a further five power and utilities companies from
five countries3 that were not included in the main survey. The power and utilities samples included in
this briefing report are therefore:
Those companies included in the Top 100s database (101 companies);
Those companies in the GFT250 (19 companies); and
An extended sample containing all Top 100s and GFT250 companies and the additional five companies
(107 companies - companies in both the Top 100s and the GFT250 have only been counted once).

The reports surveyed were analyzed by country, sector and the level and type of reporting.
More detailed explanation of the methodology employed can be obtained from the main survey.

Sector Comparison

The Top 100s sample was analyzed to discover which sectors are leading the field with respect to the
number of companies reporting. The results, which are presented graphically in Figure 1, show that the
utilities sector is leading with 50 percent of companies publishing reports. Analysis of the power and
utilities companies in the GFT250 and the extended sample revealed that reports were produced by
58 percent and 50 percent of companies, respectively.
These results exceed those for the GFT250 (45 percent) and Top 100s (23 percent) samples from the
main survey. This shows that the power and utilities sector is leading the field with respect
to the overall production of reports.

1 The term reports in this survey includes environmental, health and safety, community and sustainability reports, and a combination of
these. Annual reports will specifically be referred to as such.
2 Australia, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hungary, Italy, Japan, Netherlands, Norway, Slovenia, South
Africa, Spain, Sweden, United Kingdom, USA.
3 Canada, Russia, Singapore, South Africa, USA.
2002 KPMG LLP, a UK limited liability partnership, and the UK member firm of KPMG International, a Swiss nonoperating association. All rights reserved.

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Sector analysis of the percentages of Top 100s companies producing

corporate reports

Figure 1 :

Source: KPMG International Survey of Corporate Sustainability Reporting 2002, The Netherlands.

(101)

50%

(93)

46%

(67)

45%

(28)

43%

(114)

38%

(68)

37%

(42)

33%

(47)

30%

(109)

28%

(126)

25%

(131)

25%

(141)

24%

(241)

15%

(340)

12%

(108)
(144)

9%
6%

(250)
(1,900)

23%

65%

Global trends

The prevalence of reporting was also analyzed by country in both the Top 100s and enlarged power and
utilities samples. The result of this analysis is shown in Figure 2. Results for the extended sample are only
shown for those countries that had more than five power and utilities companies as sample sizes smaller than
this are not thought to be representative of the performance in that country. The numbers in brackets after the
country names in Figure 2 represent the number of power and utilities companies included in the extended
sample for that country

Corporate reporting in the Top 100s and extended power and utilities samples,
analyzed by country

Figure 2 :

Source: KPMG International Survey of Corporate Sustainability Reporting 2002, The Netherlands.

(5)
(10)
(10)
(2)
(5)
(3)
(3)
(4)
(4)
(4)
(5)
(3)
(3)
(5)
(7)
(15)

Top 100s from the main survey - all industries

(10)
(3)
(3)

Extended power and utilities sample

(only showing countries with more than 5 power and utilities companies)

The high proportion of Top 100s companies across all industries reporting in Japan could be as a result
of the guidelines on environmental reporting and environmental performance indicators issued by the
Ministry of Environment in Japan in 2001.
The results in Figure 2 show that the prevalence of reporting in power and utilities companies does not
mimic that for the countries in which the companies are operating. For example, overall, the USA had the
third largest number of companies producing reports, but only 20 percent of their power and utilities
companies produced reports. Conversely, relatively few companies in Canada, Spain and Belgium
reported, but significantly higher proportions of their power and utilities companies produced reports.
Further analysis of the results shows that countries leading the field in the production of
full sustainability reports across all industries in the Top 100s sample were Canada (42 percent),
USA (19 percent) and Germany (19 percent). Countries leading the field in this respect in
the power and utilities sector were Finland (67 percent) and Canada (40 percent).

2002 KPMG LLP, a UK limited liability partnership, and the UK member firm of KPMG International, a Swiss nonoperating association. All rights reserved.

Power & Utility survey

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Code of business conduct

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A code of business conduct describes the responsibilities of a company towards its stakeholders and the
way in which staff (should) put this into practice. Codes vary from half a page to sometimes as much as
80 pages. The linking of a code of business conduct to sustainability performance is an indication that a
company recognizes the relationships between sustainability performance and business performance.
The results presented in Figure 3 show that, on average, larger companies are leading in the
acknowledgement of the importance of linking sustainability and business performance, and that
power and utilities companies rank higher than the larger global companies in this respect.

Percentage of companies referring to a code of business conduct in their reports

Figure 3 :
Source: KPMG International Survey of Corporate Sustainability Reporting 2002, The Netherlands.

100%
90%
80%
70%

60%

50%
40%
Top 100

Verification

GTF 250

Power and
Utilities - Top 100s

Power and
Utilities - GFT250

Power and
Utilities Extended sample

There is an increasing focus on sustainability information which is critical for management of the
company and is vital for stakeholders to form their views. This calls for a corresponding increase in the
robustness of assurance provided. A rigorous assurance process enhances credibility of the information
reported and highlights opportunities to improve reporting processes and the information they generate.
Assurance processes should thus ensure that future reporting cycles are more efficient and less resource
intensive - in terms of both time and costs. If carefully implemented and fully integrated into existing
assurance processes, verification can become a strong component of the overall corporate strategy to
manage, monitor and report on key business risks.

Comparisons of the prevalence of verification in non-financial reports

Figure 4 :
Source: KPMG International Survey of Corporate Sustainability Reporting 2002, The Netherlands.

30%

29%
27%

27%

26%

25%

20%
18%

15%

10%
Top 100s

GTF 250

Power and
Utilities - Top 100s

Power and
Utilities - GFT250

Power and
Utilities Extended sample

The results presented in Figure 4 show that just over one quarter of the companies in the Top 100s and
the GFT250 have subjected their reports to verification. While similar results were observed for the
power and utilities companies from the Top 100s and enlarged samples, the proportion of power and
utilities companies in the GFT250 with verified reports was much lower. There is scope for companies
to evaluate the business case for verification and consult their key stakeholders in order to determine
whether verification would add value and credibility to the data presented for their business.

2002 KPMG LLP, a UK limited liability partnership, and the UK member firm of KPMG International, a Swiss nonoperating association. All rights reserved.

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Corporate Sustainability Reporting - survey results

Overview

A growing number of companies are including information or narrative about their performance in
sustainable development in their Annual Reports. This shows a commitment to dealing with, and reporting
on, these issues as the Annual Reports are viewed by a wide range of stakeholders, including financial
lenders, customers and communities. The results of the main survey showed that 49 percent of Top 100s
companies and 42 percent of GFT250 companies included environmental, social or sustainability
information in their Annual Reports. Analysis of the extended Power and Utilities sample showed that
62 percent of the companies mentioned these issues in their Annual Reports, which shows that they
already command a high profile in the Power and Utilities sector compared to many other sectors.
The analysis of the Top 100 companies and of the GFT250 revealed that 23 percent and 45 percent,
respectively, of companies produced a separate report. The content of reports is gradually changing from
covering only environment or Health, Safety and Environment (HSE), to including information regarding
performance in social and community development as well. The ultimate aim of some companies is to
produce a fully integrated sustainability report, which covers economic, social and environmental
information. Figure 5 shows the proportion of companies currently publishing the various types of
report that are in existence today.

Figure 5 :

Comparison of the proportions of different types of corporate reports produced by

companies in the Top 100s, the GFT250 and the extended power and utilities sample
Source: KPMG International Survey of Corporate Sustainability Reporting 2002, The Netherlands.

These graphics show that the power and utilities sector is following the same trend as companies
featured in the main survey, i.e. focusing on HSE reports.

Summary and conclusions

Corporate Social Responsibility and its reporting is a business reality for todays power and utilities
companies. No one would dispute the fact that methods of operation that were acceptable as recently
as 20 years ago may not be tenable today. Many social responsibility issues have long been part of
doing business for the worlds leading power and utilities companies who are accustomed to dealing
with environmental and social issues in their operations. The survey shows that reporting of
performance in these areas is well established in the power and utilities sector and that this industry is,
in many ways, leading the field with regard to managing sustainability issues and accepting the
benefits of reporting.
While a relatively large number of power and utilities companies are reporting, it is perhaps significant
that a low percentage of these reports are being subject to external verification. In particular, only
18 percent of the GFT250 power and utilities companies which report have obtained assurance over
their reports. This contrasts with the oil and gas sector, which has a lower percentage of companies
reporting, but a higher number of reports being verified (54 percent of GFT250 oil and gas companies
obtained external verification over their reports). The low rate of verification across the power and
utilities sector indicates that there is scope for many companies to consider the benefits of
demonstrating the credibility of their reported information through subjecting it to external assurance.
External and internal forces are driving the requirements for companies to be able to demonstrate
responsible behaviour to their stakeholders using transparent and credible reporting.

2002 KPMG LLP, a UK limited liability partnership, and the UK member firm of KPMG International, a Swiss nonoperating association. All rights reserved.

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KPMGs Global Sustainability ServicesTM

KPMGs Global Power and Utilities Practice

KPMGs Global Sustainability Services

works with organizations to help achieve
outstanding business performance
through enhancement of environmental,
social and economic performance.
We advise and support businesses and
governmental organizations with the
development of new and innovative
ways to deal with environmental and
sustainability issues. We assess
issues from a strategic financial and
organizational perspective. Our team
of over 350 professionals in our
network of international member
firms offers a multi-disciplinary and
industry-focused approach.

KPMGs Global Power and Utilities Practice

helps clients become industry winners by
providing multi-disciplinary services that
are focused on specific needs. KPMG
delivers its services on a global basis
through industry professionals in our
network of international member firms.
These professionals have an in depth
understanding of the industry and the daily
challenges faced by power and
utilities companies.

For more information, please contact:

David Shirley,
Global Sustainability Services, KPMG
david.shirley@kpmg.co.uk
or visit our Web site at
www.kpmg.com

The information contained herein is of a general nature and is not intended to address the circumstances of any particular
individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such
information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act
upon such information without appropriate professional advice after a thorough examination of the particular situation.

For more information, please contact:

Chris Jenkins,
Global Leader, Power and Utilities, KPMG
chris.jenkins@kpmg.co.uk
or visit our Energy and Natural Resources
Web site at
www.kpmg.com/industries

Focus on the Power and Utilities sector

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2002 KPMG LLP, a UK limited liability partnership, the UK member firm of KPMG International, a Swiss nonoperating association. All rights reserved.
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October 2002
2002
October

KPMGs UK Creative Services

No: 203 - 580