Ethical Performance
inside intelligence for responsible business


Centrica posts its principles

July 2006

Centrica is to send a set of revised business principles to 10,000 of its suppliers by the end of the year. The UK energy conglomerate will target its strategic suppliers in a preliminary mailing this month.

The company hopes that this first move in its drive to improve the management of non-financial risks in the supply chain will raise suppliers’ awareness of the new-look principles, which were approved at the end of 2005. The principles cover eight core areas, including environmental protection, human rights and labour standards.

Centrica also hopes the process will raise suppliers’ awareness of three issues that the company has identified as ‘key’ to its future prospects – climate change, vulnerable consumers and health and safety. There are no plans at this stage to monitor how its suppliers are applying the principles.

Towards the end of this year, Centrica also intends to begin training its procurement and supplier management teams on how they can monitor suppliers’ policies and practices on social and environmental issues such as human rights and labour risks.

The company’s business principles are being added to tenders and contract renewal documents. However, this is intended as an element in Centrica’s communications strategy and will not lead to suppliers being dropped.

In 2005 the company spent £9.9billion ($18.3bn) on procurement, according to its latest corporate responsibility report, published in May.

Supply-side risk has become more pressing for Centrica following recent investments overseas, said Andrew McCallum, group corporate responsibility manager. The company is now prospecting for gas and oil in two exploration blocks in Nigeria as part of a wider strategy to expand its upstream business.

‘For Centrica, this is probably the first time we are going to encounter a commercial imperative in which non-financial issues are likely to impact on the success of a project,’ McCallum told EP.

The company also plans to meet UK energy needs with supplies from liquefied natural gas sourced from other countries in Africa and the Middle East, where it may encounter more social, environmental and ethical risks than previously.

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