Integrated Annual Report 2018
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What does it mean for Naturgy? Risks and management approach

In a challenging environment, Naturgy’ acts with the goal to maintain a solid financial and business profile. Naturgy's business model looks for a balance between regulated contracted activities and unregulated ones while applying a strict financial policy.

What is our commitment?

How do we measure our performance?

Presence in socially responsible investing indices and ratings

The company occupies significant positions in the leading sustainability indices on the strength of its environmental, social and governance (ESG) performance metrics. Naturgy has been part of the Dow Jones Sustainability Index uninterruptedly for the last 14 years, and in 2018 it ranked first in the world in the Gas Utilities sector for the second consecutive year. The company has also been a member of FTSE4GOOD since the index was created in 2001, and ranks as world leader in the Multiutilities sector. During 2018, Naturgy was assessed by rating agencies Oekom, Sustainalytics and Vigeo. The company is included in the three variants of the Euronext Vigeo index: World 120, Europe 120 and Eurozone 120. Naturgy has also obtained the highest rating — AAA — from MSCI and is included in the MSCI Global Climate Index and MSCI ESG Leaders Index.

In 2018, Naturgy was recognised as a world leader for its action against climate change through inclusion in CDP's Climate Change A List. The company obtained the highest possible score in this climate change index in recognition of its action to reduce emissions, mitigate climate risks and develop a low carbon economy.

Presence in the sustainability indexes and ratings

Presence in the sustainability indexes and ratings
Green bonds and sustainable funding

In 2017, Naturgy developed a reference framework for the issuance of green bonds to fund renewable energies. Under this framework, on 15 November 2017, Naturgy issued a green bond for an amount of Euros 800 million, maturing in May 2025. The issue pays an annual coupon of 0.875%. The bonds were issued at 99.77% of par. Additionally, in 2017 the company's auditors certified compliance with the commitments acquired in the framework, and Naturgy's Green Bonds Committee met in December 2018 to assess the suitability and progress with the projects and the degree to which project development conformed to the objectives set in the issue.

In addition, in order to cover its funding needs and in line with its progress in sustainability, in 2017 Naturgy arranged a sustainable loan with ING Wholesale Banking for a total amount of Euros 330 million for four years, with the possibility of a one-year extension, whose cost is partially indexed to the company's environmental, social and governance (ESG) performance, as assessed by independent rating agency Sustainalytics, which issues a report and a rating in this connection.

The score by the agency improved in the first credit review, with the result that the interest rate was reduced.

Service excellence

What does it mean for Naturgy? Risks and management approach

The customer is the centre of operations at Naturgy. Through active dialogue, the company will provide speedy and efficient service which, as well as complying with the legal and profi tability requirements, meets the customer’s needs.

If the company fails to provide quality products and services, has a customer service that can be improved, and lacks communicative fluidity with the customer, it runs the risk of the customer requesting to finalise the contract or submitting complaints.

The failure to adapt or lack of flexibility in light of the current context of sector decarbonisation and digitalisation could lead to inefficiencies and losses of market share.

What is our commitment?

How do we measure our performance?

 Overall satisfaction with service quality

*Chile has been calculated based on a 1-7 scale, unlike other countries which used a 0-10 scale.

What are our main milestones in 2018?

Analysis of the 2018 results

The customer as the focal point

In 2018 the company began a new stage with an overhauled brand that reflects the corporate transformation, an evolution resulting from 175 years’ experience and which supports our commitment with the customer to adapt ourselves to both the present and the future.

This new stage reasserts our Customer Centricity vocation as the basic pillar of the Strategic Plan 2018-2022, placing the customer as the focal point of all decisions in order to offer an excellent service in a simpler, more innovating, more digital, nearer and more environmentally friendly way

Our value proposal is to offer our customers simple, close at hand and practical solutions that help the customer on a daily basis, supporting ourselves through digitalisation and innovation, in order to provide excellence in service.

Quality and reliability of the service

Maintenance of the gas and electricity facilities is an essential aspect within Naturgy’s mission to achieve a level of quality and reliability of the service that satisfies customers and enables us to comply with the regulatory requirements of the countries where we operate and with the most demanding standards of the industry. The aim of maintenance is to improve the safety and reliability of gas and electricity networks, and to maintain a high level of service quality.

Naturgy employs modern and innovative methods and work equipment that are included in safe and efficient work and operation procedures. The company also encourages close collaboration with contractor companies in the permanent quest to achieve best practices in the development of its activity.

A set of inspection and assessment actions are carried out, which help to define the corresponding preventive and mitigation measures to ensure a safe and ongoing supply, maximising the useful life of assets, and which are included in the Maintenance Plan for each type of facility.

The preventive and corrective maintenance procedures are frequently subject to reviews by the technical quality, safety, and internal auditing, compliance and control divisions.

The maintenance actions performed by the company are reflected in the evolution of the main quality/service indicators, which have revealed a notable improvement in recent years. These indicators measure, inter alia, response times to a notification of a malfunction or anomalous situation affecting the grid, the stoppage time per customer or installed power, the kilometres of the grid and facilities inspected, and the number of incidents per kilometre of grid.

To ensure that supply meets demand, Naturgy regularly reviews the operating conditions of its networks, to make sure these are correctly sized or, if appropriate, to determine the potential needs of repowering or enlarging these. Furthermore, in electricity distribution, Naturgy partakes in several R&D&I projects for storage of energy in batteries, the development of smart grids, the application of drones to the maintenance installations and the introduction of predictive maintenance techniques for the main grid equipment.

Products and services adapted to customers' requirements and priorities

Naturgy’s commercial offer is targeted at homes, businesses and major customers. The products offered are not restricted solely to the supply of gas and electricity, but encompass other aspects.

The development of new products is based on the needs detected through the mechanisms enabled by the company. The commercial supply seeks efficacy and efficiency above other factors. Efficacy, to satisfy customers’ demand; and efficiency, to achieve the maximum competitiveness.

In 2018 we have renewed the commercial catalogue with new tariffs and new services to offer the customer a broader range of choices and to find more appropriate solutions for their needs, whilst simultaneously seeking to simplify the portfolio to provide customers with a simpler and more comprehensive experience. In the domestic area, we have also redesigned promotions by applying benefits according to customers’ characteristics and habits.

Customer service

Naturgy has introduced an innovative Customer Service Model that is fully adapted to customers’ characteristics and needs, offering close at hand and accessible solutions that allow for greater comfort and flexibility to our customers’ requests. This model is included in the quality management system certified in accordance with ISO 9001 by AENOR.

The customer service channels that Naturgy makes available to customers aim to offer customised service that satisfies their expectations, and with a particular focus on digital channels in line with society’s evolution, to achieve a swift and flexible resolution with self-management, simplicity and in an environmentally friendly way.

Customer service model

Our model comprises three focal points:

Operational and training model: the aim is to anticipate customers’ needs through predictive and data analysis models.

Technological model: committed to a technological revolution that encourages greater self-management by customers.

Procurement and financial model: building a partnership model with suppliers and an alignment of the win-to-win objectives.

Provision of customer service at Naturgy

Digital channel

Telephone channel

Guarantee office

Face-to-face channel - Centres

Face-to-face channel - Personal manager

The company manages claims from three different areas: retail commercialisation, wholesale commercialisation and distribution of gas and electricity.

In the retail sphere, in Spain over 650,000 customer claims were processed, approximately half of them dealing with billing issues. The process with the next highest number of claims was that of entering into contracts and, finally, claims related to payment collection. These three kinds of claims account for approximately 90% of all those received, whilst there are other processes, such as registration for new supplies, management of payment defaults and problems with readings, which make up the diff erence. The average claim response time was approximately one week.

In the wholesale sphere, around eight thousand claims were processed, down approximately 20% year-on-year. Most claims concerned billing and measuring processes, and none of them were of a relevant nature. Around 80% of these claims were resolved within the deadlines established.

In the area of gas and electricity distribution, any claim or complaint received from customers via the different channels available -whether through their gas or electricity marketer in issues for which the distributor is responsible (meter reading, supply quality, new registrations, etc.), directly with the electricity or gas distributor of the Naturgy Group through the customer service channels of the distributors, via the website contacts, by postal mail or through any competent organisation- is received and processed centrally in our integrated claims management system at the Shared Services Department.

The organisation handles not only customers of the electricity or gas system in its operational area, but also any individual or legal entity that may have a claim or complaint through the action or non-action of our distribution assets (works in progress, technical elements on public thoroughfares, etc.) is dealt with as if they were a customer

With regard to transparency in communication of claims or complaints submitted, both business of Electricity Distribution in Spain (UFD) and Gas Distribution in Spain (Nedgia) comply with the obligations set out in circular 2 of 2016 issued by the National Securities Market Commission (CNMC), reporting every quarter with regard to the details on the situation of claims processed in accordance with the formats and deadlines established by the regulator.

Average claim response time in the retail sphere
1 week
Claims were processed in the wholesale sphere
-20%
vs. 2017

Customer’s satisfaction and experience

Naturgy listens to its customers’ opinions and incorporates them into the decision-taking in order to develop innovative products and services that meet their needs and expectations.

The company has a model to measure customers’ experience, through which it constantly monitors the satisfaction of its customers and the level of recommendation.

The model is based on three levers

Measurement: Naturgy collect the opinion of its customers through surveys that are classified into two supplementary blocks: general surveys and interaction with the company surveys.

Analysis: the results are added to the daily management reports, which allows us to include the customer’s voice in decision taking.

Close the loop: process that enables immediate corrective action through the management of alerts that activate whenever the minimum satisfaction and recommendation thresholds required to maintain the level of quality that the company imposes with its customer relations are not reached.

Customer Experience programme (CeX)

The Customer Experience programme, based on cultural transformation, was born in 2015 at group level with the purpose of making the company a benchmark at international level in customer satisfaction in the energy sector, measured in terms of recommendation.

With Customer Experience the company introduces a new methodology through which the customer is at the centre the decisionmaking process, changing the way we do things in order to meet their needs and expectations, but above all, being sensitive to how they perceive the company and their experience within the company.

As a response to our commitment towards the customer, we have formalised the Customer Experience as a cross-cutting group process and we have developed the Customer eXperience Global Policy for the group.

The Policy sets out the Naturgy action framework to ensure that the Customer Experience is integrated into the company’s operations and decision taking.

As a result of this Policy, this year we have introduced the Clear Communication Project in the Customer Service billing area, in retail customers and markets and in infrastructures in Spain, providing the knowledge and tools so that people can develop a clearer and simpler communication for the customer

Working model based on five pillars

Privacy and security of the customer’s data

Naturgy, as part of its commitment to the privacy and security of data of employees and customers, has updated the Information Security Policy and the regulatory corpus of information security that ensures proper processing of this data throughout their life cycle collection and processing through to removal or safeguarding this data once the relationship has terminated.

The Policy and the regulatory corpus are communicated to employees, suppliers and customers, and is implemented in line with the legal requirements that govern the processing of information, the internationally accepted best practices and standards.

This regulatory corpus includes a specific technical standard, which is for the purpose of guaranteeing the protection of personal data at Naturgy and applies to all organisational units and companies of the group that capture or process personal data, as well as partners and suppliers that collaborate in such processing. This standard complies with the provisions set out in the EU General Data Protection Regulation (GDPR).

Security forms an essential part of the design, development and exploitation of all processes and systems, in particular those that process information. All of Naturgy’s systems include procedures for authentication and administration of authorisations and access and are designed to guarantee that the use of these does not affect the security of the data handled.

Responsible environmental management

What does it mean for Naturgy? Risks and management approach

Naturgy is aware of the environmental impacts that its activities have on the surrounding area, and the company therefore pays special attention to environmental protection and the effi cient use of natural resources to satisfy the energy demand.

Naturgy goes beyond legal requirements and even the requirements we adopted voluntarily in our care for the environment. We involve our suppliers and we encourage and work with our stakeholders to use energy responsibly.

Inadequate management of climate change and its associated risks can lead to substantial losses for the company, caused by the increase in exposure to natural disasters, the decarbonisation trend of the sector and the loss of affi nity on the part of stakeholders.

Improper environmental management can cause environmental impacts and the deterioration of natural conditions and biodiversity in the areas where the company operates. This, in addition to the direct impact on the environment, can cause the company reputational harm. The risk is greater if the company has infrastructures and/or carries out operations in protected areas.

What is our commitment?

How do we measure our performance?

Unit 2018 2017
Direct greenhouse gas emissions MtCOsub2 eq 18,3 20,5
Emission factor for electricity generation1 tCO2/GWh 342 388
Installed capacity free of emissions1 % 27,5 26,4
Net production free of emissions1 % 24,9 19,6
Activity with environmental certification2 % 88,7 87,7
Water consumption Hm3 26,5 28
Consumption of raw materials Kt 6.729 7.580
Natural gas Kt 4.736 4.638
Coal Kt 1.630 2.480
Petroleum derivatives Kt 352 452
Uranium Kt 11 11
Direct energy consumption3 GWh 60.614 64.728
Indirect energy consumption (fi nal use of natural gas distributed/commercialized) GWh 577.647 613.181
Resources targeted at the prevention of environmental risks4 Million euros 494 96

1 Includes hydroelectric, wind, nuclear and solar generation.
2 Percentage of Ebitda certified with regard to that which is certifiable. The Ebitda used in the ratio is the November closing Ebitda.
3 It includes consumption of renewable, non-renewable and electricity resources and separates the electricity and the heat sold.
4 The 2018 figure includes the investment in renewable energies.
Note: It does not include the information of Moldova, Kenya and South Africa. The figures for Moldova are: GHG emissions: 0.002 MtCO2e. Consumption of raw materials: 0.5 kt (0.0001 kt natural gas, 0.5 kt petroleum derivatives), Direct energy consumption: 254 GWh.

Provisions and guarantees for environmental risks

The company makes financial provisions to cover the materialisation of potential environmental risks, including

In addition, Naturgy has guarantees to cover the occurrence of environmental risks in the insurance policies it has taken out. The insurance policies that the company has contracted and in which there is environmental coverage are:

  • Environmental liability insurance: limit contracted for a value of Euros 150 million per loss event and in the annual aggregate.
  • Liability coverage for sudden and accidental pollution in the general public liability policy: limit of Euros 700 million per loss event.
  • Protection and compensation insurance: maximum limit of USD 500 million per loss event, in accordance with the Rules of the UK P&I CLUB 2018 (Charterers), to cover the liabilities for pollution arising from chartering vessels.

What are our main milestones in 2018?

What are our goals for 2019?

Growth of renewable energies

Growth of renewable energies, in line with the goal of the Strategic Plan 2018-2022 (tripling installed capacity) to contribute to the mitigation of climate change and the energy transition.

Promote innovation and the development of renewable gas projects

Promote innovation and the development of renewable gas projects as an energy and storage vector that facilitates the transition to a circular and decarbonised energy model.

Offer sustainable mobility solutions

Offer sustainable mobility solutions for cities and land and maritime transport that improve air quality.

Protect biodiversity in operations

Protect biodiversity in operations, applying a preventive approach, implementing best practices and encouraging the creation of natural capital.

Analysis of the 2018 results

Analysis of the 2018 results

Environmental management

Responsible management of the environment is a strategic pillar for Naturgy, which reflects its commitment to the Corporate Responsibility Policy approved and supervised by the Board of Directors. The policy includes the company’s action principles, with an emphasis on promoting the sustainable development of society through the supply of competitive, safe energy and with the utmost respect for the environment.

The most significant current and foreseeable effects of the company’s activities on the environment are the following:

  • Contribution to climate change.
  • Pollution of air, water and land.
  • Biodiversity loss.
  • Consumption of non-renewable raw materials.
Strategic pillars

Climate and air

Climate and air: contributing to the mitigation of climate change, the energy transition and the improvement of air quality.

Circular economy

Circular economy: promoting eco-efficiency in the use of resources to reduce negative environmental impacts.

Natural capital and biodiversity

Natural capital and biodiversity: encouraging the preservation of natural and cultural heritage within the areas of operation.

To minimise these effects, Naturgy employs a preventive approach throughout the entire value chain of its business:

  • Certified and externally-audited environmental management system aimed at preventing pollution and reducing environmental impacts along the entire value chain, involving employees, suppliers and other stakeholders. During the design phase of new facilities and during dismantling, the environmental conditions of the surrounding area are studied, and the projects are adapted, including the necessary preventive, corrective and compensatory measures. During the operational phase, strict monitoring is performed to ensure compliance with legislation and to maintain impacts within the limits set.
  • Integration of the environment in the management of risks and opportunities and in the decisiontaking processes, paying special attention to climate change and the energy transition.

To ensure consistency and uniformity in the company’s key environmental management processes, there are global methodologies and tools for environmental management that are used in different businesses and geographies, including the following:

  • Themis, for the identification, registration, monitoring and management of compliance with legal requirements.
  • Prosafety, for recording and management of the findings, nonconformities, observations and opportunities to improve environmental management.
  • Enablon, for recording and centralized management of environmental indicators related to atmospheric emissions, consumption of raw materials, water and other resources, discharges, waste, etc. The system is also used to monitor environmental targets and action plans.
  • Geographical information system of biodiversity, showing the protected natural areas, the group’s facilities and the initiatives carried out to protect and improve natural capital.
  • Carbon footprint, to determine greenhouse gas emissions throughout the entire value chain, including indirect emissions produced by third parties upstream and downstream of group activities.
  • Environmental footprint, to measure the company’s environmental performance, distinguishing between the components of atmosphere, waste, climate change, water, biodiversity and resources.
  • DAMAS, to identify and assess the direct and indirect environmental aspects of the company, allowing us to establish the most relevant aspects to take into account both in the environmental management of these as well as the environmental targets defined each year.
  • Environmental planning, through which action lines are defined, introduced and supervised to reduce environmental impact and for continuous improvement.
  • Environmental audits, both external and internal, conducted within the scope of the integrated management system.

Integrated Management System (IMS)

For years, Naturgy has had an integrated quality, environment, health and safety management system (IMS), certified according to the requirements of the ISO 9001:2015 and ISO 14001:2015 standards. This system is audited externally every year.

The processes certified through this system are:

  • Extraction and injection of natural gas.
  • Transport and operation of the Maghreb-Europe gas pipeline.
  • Electricity generation (thermal, hydraulic, wind and solar origin).
  • Distribution of natural gas and electricity.
  • Wholesale and retail commercialisation of natural gas and electricity.
  • Development and execution of engineering projects.
  • Energy management in organised Iberian electricity markets.
  • Corporate activities involving customer service, billing and payment, training and management of office buildings.

Climate and air quality

Naturgy identifies, records and analyses all the environmental risks and events that have occurred in order to define, apply and disseminate preventive measures to reduce potential damage to the environment. To do this, facilities with environmental risk are assessed using recognised standards as a reference. The first element for management is self-protection plans and their associated procedures, in which the most appropriate risks and responses are identified in light of potential accidents and emergency situations that can cause environmental damage.

In addition, there are global and uniform procedures and systems in the different businesses and geographies for reporting, classifying, monitoring and managing environmental events (Prosafety).

This methodology allows not only an adequate and uniform monitoring of environmental events, but also the identification, analysis, development, application and exchange of preventive measures and best practices in risk management at a global level.

For management of the climate change risk, Naturgy has a specific tool, developed in Ms Excel and @Risk, which allows us to estimate the Group’s exposure to risks at an aggregate level and broken down by business and geography. This tool analyses the impact of climate change on different businesses and technologies, over time periods (short, medium and long term) and geographies. This allows us to estimate the impact of different climate change scenarios (IPCC) through different indicators:

  • Physical: impact forecasts on energy (produced, traded, purchased, etc.) water level with regard to the height of the corporation’s facilities, availability of hydric resources, etc.
  • Environmental: emissions of CO2.
  • Business: market shares and penetration levels.
  • Economic: impact forecasts on level of revenue, Ebitda, cash flow and present value of the business, as well as estimates of the value at risk for different confidence levels.
  • In addition, it means we can simulate new scenarios based on new products and services, etc. and the implementation of R&D&I actions, generating different scenarios to assess the impact.

    Naturgy believes that climate change is a global environmental challenge and is committed to offering its customers eco-efficient and less CO2-intensive energy products and services to help mitigate climate change and the energy transition.

Main strategic lines of action in terms of climate

Favouring the mitigation of climate change and the improvement of air quality

Favouring the mitigation of climate change and the improvement of air quality, displacing carbon-intensive fuels and encouraging the promotion of energy savings and efficiency both in our own facilities and at our customers.

Contributing to the decarbonisation of the system

Contributing to the decarbonisation of the system, increasing the use of gas and renewable electricity and encouraging their integration through the development of smart grids.

Supporting international climate change negotiations

Supporting international climate change negotiations and mechanisms that foster technological neutrality and industrial competitiveness, promoting the development of the most appropriate technologies at each stage of the energy transition.


Naturgy has a voluntary goal for GHG reduction. This target is aligned with science to avoid an increase in temperature above 2°C (Science Based Targets Initiative. Tool V8): Average reduction of 26% of total direct emissions for the 2013-2025 period, taking 2012 as the base year.

Target to reduce emissions 26%

The main lines of action carried out to reduce GHG emissions:

Displacement of carbon intensive fuels

Fostering renewable electricity

Promoting renewable gas

Encouraging the gas-renewable binomial in generation

Reducing fugitive emissions

Increasing energy efficiency in our facilities

Promoting energy efficiency at our customers

Exploring and developing technologies to reduce emissions

For management of climate change, the following means are available:

Measurement and control tools for GHG emissions and operational plans implemented to reduce them, including the annual calculation of the group’s carbon footprint.

Transparency and dissemination of information, publishing the carbon footprint report and participating in the international benchmark indexes on climate change, such as the CDP.

Participation in the following initiatives related to climate action:

  • Carbon Pricing Leadership Coalition (CPLC).
  • Caring for Climate.
  • Statement on fi duciary duty and climate change disclosure.
  • Corporate commitment with the Science Based Targets climate policy initiative.

Circular economy

Naturgy is committed to promoting the circular economy through the efficient use of resources to reduce environmental impacts. To do this, different lines of action are developed, focused fundamentally on:

  • Improving eco-efficiency in the use of resources, energy, water and raw materials, reducing pollution, waste and its impact on the environment.
  • Innovating for the promotion of renewable gas (biomethane and hydrogen) as an energy and storage vector that facilitates the transition to a circular and decarbonised economy model.
  • Off ering sustainable mobility solutions for cities and land and maritime transport that reduce atmospheric contamination and improve air quality.

Within the framework of the integrated management system, Naturgy develops management and control procedures aimed at minimising the waste that is disposed of in landfills, through prevention, reuse, recycling and/or energy recovery

Most water consumption at the facilities of Naturgy is due to the operation of thermal power stations. Specifi cally, the majority is produced through the evaporation of water in the cooling towers; the rest corresponds to consumption in other processes, in the water-steam cycle and in other auxiliary services. Most of the water collected is returned to the environment. Depending on its origin, the main source of supply is the sea, with fresh water accounting for a much smaller contribution. It is important to note that Naturgy, aware of the scarcity of water in the environments of some of its power plants, introduced systems for the reuse of wastewater in these facilities.

Regarding effluent discharges, at power stations we monitor and analyse not only the effl uents but also of the waters of the environment receiving the effluent discharges. The treatment equipment and systems worked as planned in 2018, complying with environmental permits. In addition, studies of the receivingenvironment reveal that no significant impacts were generated in the aquatic ecosystems where the effluent discharges are made.

Furthermore, Naturgy also promotes energy efficiency, both in its own facilities and at its customers, helping to reduce environmental impacts due to unconsumed energy. Moreover, numerous innovation initiatives are under development in the field of renewable gas, in order to promote this new energy vector, which allows the recovery of organic waste and reduces GHG emissions.

Natural capital

Naturgy is committed to the preservation of natural capital, biodiversity and cultural heritage in the areas around its facilities, with special attention paid to protected areas and species. To this end, it is based on the precautionary principle, conducting prior environmental studies during the design phase that minimise the negative impacts of the complete life cycle of the facilities.

Introducing additional voluntary measures contributes to the knowledge and mitigation of the impacts arising from the development of new projects and the operation of the facilities once they have been introduced. The company also takes into consideration the opinion of stakeholders in places where activities and projects are developed.

In addition, in the areas surrounding the facilities, especially in those that are close to protected areas or of high value for biodiversity, studies are carried out to improve the knowledge of the natural spaces and to reduce impacts.

The development of Naturgy’s activities requires the occupation of land. When the facilities are being designed, environmental impact studies are carried out, in which the protected areas that have a high ecological value are analysed, adapting the project to avoid or minimise the impacts on biodiversity. In those cases in which it is not possible to completely avoid the impact, the required compensatory measures are introduced.

Once the facilities are operational, they are integrated into a Geographical Information System, where they are crossed-checked with the protected natural spaces to identify, quantify and monitor the impacts on biodiversity.

To minimise these effects, the company applies operational control procedures and, at those facilities where there can be greater potential risk, we carry out environmental assessment studies and define environmental emergency plans to prevent the incident before it occurs, or to minimise any damage. We also regularly perform environmental emergency drills to test the procedures that have been defined.

The key impacts on biodiversity that may arise from the company’s operation in the area of the sites and in the areas adjacent to them, are the following:

  • Temporary condition affecting the fauna present in the environment, as a consequence of the construction of transportation and distribution infrastructure of gas and electricity.
  • Permanent condition affecting bird life and arboreal vegetation, as a result of the operation of transport networks and the distribution of electricity.
  • Impact on the abiotic and biotic environment of the environments around the facilities, as a consequence of emissions arising from combustion.
  • Condition affecting the populations of species present in the environment, as a consequence of changes in land use and the permanent presence of the facilities in the natural environment.
  • Effect on the aquatic environment, as a result of effluent discharges.
  • Relevant effect on biodiversity (positive and negative), as a consequence of the creation of reservoirs associated with hydraulic power stations.

Interest in people

What does it mean for Naturgy? Risks and management approach

For Naturgy it is essential to foster a quality working environment, based on respect, diversity and personal and professional development. Naturgy also has a Code of Ethics that establishes the guidelines governing the ethical behaviour of all employees in their daily work and, specifi cally, with regard to the group's relations and interactions with its stakeholders.

Persons that suffer any kind of discrimination or do not feel themselves to be fairly rewarded tend to reduce their pride of belonging and lower their productivity. Furthermore, research reveals that the increase of pay inequality is associated with lower profits, productivity and business competitiveness.

The major transformation of the energy sector and digitalisation require new expertise and skills which, if they are not covered in a flexible way, would place the company at a disadvantage with its competitors, with the resulting consequences this could have on the business.

What is our commitment?

How do we measure our performance?

12700 employees

Nº employees 18-35 (%)1 36-50 (%) >50 (%) Management team Middle managers Technicians Operators
       
Germany 7 14.3 57.1 28.6 - - - - 71.4 28.6 - -
Argentina 767 21.3 37.4 41.3 3.7 0.8 13.7 3.5 15.1 4.8 45 13.4
Australia 8 50.0 37.5 12.5 - - - - 25.0 - 62.5 12.5
Belgium 3 66.7 33.3 - 33.3 - - 33.3 - 33.3 - -
Brazil 478 25.7 61.5 12.8 5.2 2.9 12.8 7.1 15.5 11.5 29.3 15.7
Chile 3.046 27.2 49.1 23.7 2.2 0.8 12.6 3.2 26.5 11.0 33.7 10.0
Colombia 84 36.9 48.8 14.3 10.7 13.1 6.0 9.5 17.9 22.6 8.3 11.9
Costa Rica 20 20.0 65.0 15.0 5.0 - 5.0 - 10.0 - 75.0 5.0
Spain 6.532 11.1 59.9 29.0 11.1 4.4 15.2 4.6 19.9 15.0 19.2 10.6
France 66 57.6 40.9 1.5 10.6 3.0 6.1 7.6 28.8 31.8 3.0 9.1
Holland 7 28.6 71.4 - 14.3 - 14.3 - 28.6 28.6 14.2 -
Ireland 40 50.0 45.0 5,0 12.5 2.5 12.5 5.0 32.5 27.5 7.5 -
Israel 15 73.3 26.7 - - - 13.3 6.7 53.3 26.7 - -
Morocco 93 7.5 43.0 49.5 3.2 1.1 39.8 2.2 11.8 2.1 29.0 10.8
Mexico 989 37.1 54.5 8.4 5.8 1.3 16.5 4.0 23.7 10.5 27.2 11.0
Panama 362 37.0 36.2 26.8 5.0 2.5 21.3 9.9 12.7 11.6 25.4 11.6
Peru 21 52.3 42.9 4.8 - 4.8 14.3 4.8 33.3 14.3 9.5 19.0
Portugal 18 38.9 61.1 - - 11.1 - - 16.7 44.4 5.6 22.2
Puerto Rico 5 20.0 20.0 60.0 40.0 - 40.0 - - - - 20.0
Dominican R. 84 19.0 66.7 14.3 1.2 2.4 23.8 9.5 3.6 7.1 50.0 2.4
Singapore 4 75.0 25.0 - 25.0 - - - 75.0 - - -
Uganda 51 66.7 29.4 3.9 2.0 - 39.2 5.9 - 2.0 43.1 7.8
Total 12,700 20.1 54.3 25.6 7.4 2.9 14.8 4.5 21.0 12.8 25.8 10.8

1 The indicators that represent the evolution over the year include information from companies held for sale (Moldova, Kenya) or sold prior to the year-end (South Africa) provided that the opposite is not specified, while the indicators that represent information at the year-end do not include information about these companies.

Annual average of indefinite and temporary contracts by age, gender and professional category
Workforce by type of contract 2018
Permanent contract 67.7%
30.1%
Temporary contracts 1.2%
1.0%
Total   100.0%
Average annual workforce temporary contract by professional category 2018
 
Executives 2 -
Technicians 102 70
Administrative staff - -
Operatives 109 62
Total 213 132
Average annual workforce temporary contract by age 2018
 
18-35 136 92
36-50 68 38
>50 9 2
Total 213 132
Rotation and voluntary rotation index
  2018 2017
Rotation 17.4% 6.4%
Voluntary Rotation 2.5% 2.9%
Number of dismissals by age group, gender, and professional category
Dismissals by professional category and gender
 
Executives 9 2
Technicians 111 32
Administrative staff - -
Operatives 70 55
Total 190 89
Dismissals by age group and gender
 
18-35 60 23
36-50 72 44
>50 58 22
Total 190 89
Salary gap1

Below is a detail of the salary gap measure according to which a % above zero represents the % that women earn less than men:

Executives Technicians Administrative staff Operative
Argentina 21.4% 12.8% 11.6% 17.8%
Brazil 22.7% 14.7% - 24.1%
Chile 38.1% 6.1% 18.0% 17.8%
Colombia 10.2% 28.0% (2.4%) -
Spain 13.1% 4.5% 6.2% 13.3%
France 23.7% 18.1% 8.2% -
Ireland 38.9% 19.6% - -
Morocco 4.5% 6.7% 7.1% -
Mexico 4.5% (2.1%) (26.6%) (30.1%)
Moldova 2.3% 2.5% (17.9%) (2.1%)
Panama (20.4%) (16.1%) 15.9% -
Dominican R. - (10.0%) 22.7% -
1 Data is provided about the most relevant countries for Naturgy. The difference in salary shown by the results is in line with the context of the sector and generated mainly by the company's past gender make-up, which means greater average seniority of men in comparison with women. The reason why boxes are left blank is because there are no employees of one gender or another in said professional category
Average remuneration by age group, gender, and employee category (euros)
2018 Executives Technicians Administrative Staff Operative
Argentina 59,279 46,587 22,995 20,060 17,868 15,799 20,135 16,555
Brazil 51,148 39,534 21,571 18,399 - 18,494 14,887 11,306
Chile 156,804 96,992 46,327 43,515 28,184 23,125 17,951 14,456
Colombia 83,685 75,116 15,804 11,377 6,156 6,305 - -
Spain 102,177 88,797 45,203 43,135 33,346 31,269 31,691 27,498
France 100,743 76,888 52,909 43,353 35,231 32,339 - -
Ireland 99,000 60,500 56,000 45,000 - - - -
Morocco 93,061 88,902 34,577 32,248 13,090 12,155 17,532 -
Mexico 33,186 31,693 14,442 14,747 6,828 8,646 6,567 8,544
Panama 38,576 46,463 17,256 20,036 18,896 15,899 14,128 -
Dominican R. - 73,110 23,216 25,545 12,210 9,439 11,946 -
It includes only the fixed remuneration.
Average remuneration by age (Spain)
18-35 34,446
36-50 48,737
50 56,196
Disabled persons integration rate
2018 2017
Employees with disabilities (%) in Spain 2.40 2.57
Percentage of employees covered by collective bargaining agreements
2018 2017
  Not covered by collective bargaining agreement Covered by collective bargaining agreement Not covered by collective bargaining agreement Covered by collective bargaining agreement
Germany - 100.0 - 100,0
Argentina 19.3 80.7 23.0 77.0
Australia - 100.0 - 100.0
Belgium 33.3 66.7 18.2 81.8
Brazil 25.5 74.5 24.6 75.
Chile 4.6 95.4 4.8/td> 95.2
Colombia 47.6 52.4 45.5 54.5
Costa Rica - 100.0 - 100.0
Spain 32.0 68.0 29.8 70.2
France 72.7 27.3 71.3 28.7
Holland - 100.0 - 100.0
Ireland 100.0 - 95.1 4.9
Israel - 100.0 - -
Morocco 34.4 65.6 33.0 67.0
Mexico 19.0 81.0 18.3 81.7
Panama 61.9 38.1 59.9 40.1
Peru - 100.0 0 100.0
Portugal - 100.0 0 100.0
Puerto Rico - 100.0 44.4 55.6
Dominican R. 3.6 96.4 3.9 96.1
Singapore 100.0 - 100.0 -
Uganda - 100.0 - 100.0
Total 24.1 75.9 22.8 77.2
Training1
2018 2017
Workforce trained (%) 91.0 93.7
Total course hours 645,311 613,623
2018
  Management team Middle managers Technicians Operators
Total course hours 113,262 137,823 204,617 189,609
1 They do not include Kenya or South Africa. They do not include figures for companies and/or countries that do not have access to the Success factor platform (Energía de San Juan, S.A., Ireland and Israel).

What are our main milestones in 2018?

What are our goals for 2019?

What are our goals for 2019?

Application of the new People Model.

What are our goals for 2019?

New ways of working project: TEAM.

What are our goals for 2019?

Launch of the Transformational Leadership Academy.

What are our goals for 2019?

Naturgy in-house Communication Plan focused on: corporate priorities, the executive role in communication, and fostering participation.

Analysis of the 2018 results

People management model

During 2018 the people management strategy at Naturgy has revolved around the transformation and creation of value, as set out in the company’s roadmap. The empowerment of people is one of the levers that drives the transformation the company is introducing, and, in this regard, management of people has focused on defining its management model, bridging the new strategic targets with people and simplifying processes to accompany the creation of value.

The people management model is designed as a dynamic ecosystem that enables people to be part of the company’s evolution, and is one of the key levers, together with customers and shareholders, in the creation of value. The Naturgy people model applies at corporate level and incorporates three major areas, where a series of focal points and their associated processes come together to ensure consistency and solidity of the model.

Measures to foster employment

Naturgy has a pool of young professionals with sound technical and management training, through the annual programmes of work experience and the agreements for Dual VT. A pool that enables us to respond to the company’s needs and to attract the best talent in those spheres of knowledge in which Naturgy is the leader:

  • Professional practices programme: Naturgy has partnerships with the main universities and higher education centres in those countries where it operates, through which it selects young people for work experience each year.
  • The Dual VT: offers Naturgy the opportunity to participate in the vocational training of young people, developing academic content adapted to the needs of the company, ensuring rapid adaptation to the working environment.
Focal points of the people management model

Commitment and loyalty

Commitment and loyalty: which works on attracting, retaining and the segmentation of talent.

Total compensation

Total compensation: which links the professional category, remuneration and the working environment.

Training

Training: as an element of evolution and development of the company’s professionals.

Diversity and equality

For Naturgy it is essential to promote diversity and equal opportunities in an environment of respect, understanding and ongoing dialogue, with a special focus on gender diversity targets, on the inclusion of individuals with various disabilities and extending this commitment to suppliers and collaborating companies.

In 2013, Naturgy established an Equality Plan at corporate level together with the union representations that was published in the Official State Gazette under Registration Number 90100073112013. It is based on 14 strengths to be maintained and 14 weaknesses to be corrected identified by outsourced experts, giving rise to 32 actions in issues of communication and raising awareness, culture and leadership, development and promotion, remuneration, flexible employment and work-life balance, selection, prevention of harassment, measurement and monitoring.

The creation and activation of a specific protocol against harassment; the best practices protocol in the selection processes, or the communication guide for business professionals that need to intervene for some reason in the selection process, are just some of the measures introduced and which, together with the Integrated Diversity Plan, approved at the end of 2015, have propitiated major advances in diversity and equal opportunities.

The protocol against sexual harassment lays out some preventive actions to avoid situations of harassment that include informing all employees about the protocol; training the entire workforce in the issue, and in particular employees with personnel under their charge; the obligatory nature and responsibility of each employee to establish their relationships with respect and dignity and for each employee to report any case of harassment to their superior.

The action procedure in the event of detecting any situation of harassment sets out two channels:

  • Informal procedure: through which the affected party informs the alleged aggressor that this behaviour is not welcome, that it is offensive and interferes with their work. And if the situation is not resolved, then the formal procedure will be instigated.
  • Formal procedure: through which the harassment situation is reported, following these steps:
    • Notification to the Code of Ethics Committee or reporting to their superior or to the Human Resources Department, who will decide whether to accept it for processing.
    • Investigation, gathering the information and conducting interviews with the affected parties and witnesses, if there are any.
    • Possibility of introducing precautionary measures
    • Report on conclusions and resolution of the procedure, which will include the corrective measures and the introduction of the following solutions: filling of the report or commencement of the disciplinary file depending on the seriousness of the offence

The protocol offers a series of guarantees, inter alia the complete anonymity of the informant; the process will be completed as expeditiously as possible; the intervention of the workers’ representatives may be requested and an impartial hearing guaranteed, along with fair treatment for all of the affected parties. No reprisals will be allowed, and the identity of the informers will be protected.

In 2018, the company’s commitment to diversity remained strong, consolidating the Integrated Diversity Plan which brings together specific initiatives, in all geographies and territories, for people management, classified into three areas: gender, disabilities and age.

As regards integration and accessibility of people with different capabilities, the Management of Naturgy acts as an impetus for a range of actions targeted at standardising management of functional diversity:

  • Family Plan: this provides relatives of employees with advice from professionals and experts in disability and employment integration, so that from the earliest ages they can develop the skills and abilities that enable persons with disabilities to increase their autonomy and employability.
  • Capacitas Plan: this aims to promote the employment of people at risk of social exclusion on grounds of disability. 
  • Aflora Plan: this encourages those employees of Naturgy with some degree of disability to contact the company for information on new measures specifically designed to achieve the full integration of everybody in a unique environment of diversity.
  • Bequal Plus certificate: Naturgy renewed this certificate in 2018, substantiating our commitment in corporate social responsibility and disability.

The Equality Plan has encompassed the development of best practices protocol to avoid discrimination in the selection processes, and which includes the following measures:

  • Open up the spectrum of recruitment sources to associations and foundations to guarantee equal job opportunities at the company.
  • In the publication of job offers:
    • No discriminatory terminology is used.
    • Put the feminine gender first followed by the masculine.
    • Gender separation will always be carried out with slashes.
    • Do not use any notation as a requisite that does not offer equal conditions to the different candidates on the grounds of gender, appearance, disability, age, religion or personal beliefs of any kind.
    • Only specify the need for a driving licence when the job requires this.
    • Do not use possession of own vehicle as a requirement.
    • Do not use the need to reside near the place of work as a requirement.
  • In the selection process:
    • In the case of disabled candidates, make sure we have the accessibility required so that they can attend the interview with us.
      • Avoid prejudices and stereotypes associated to gender, appearance, disability, age, religion, religious beliefs of any kind.
      • Transmit the corporate image.
      • Avoid personal questions and, if necessary, justify them.
      • Avoid preferential treatmentl.
  • In the finalisation of the process:
    • Explain the result of the process.
    • Explain the next steps if they have passed the process.
  • On joining the company:
    • Inform them about the equal opportunity policies.
    • Transmit values.
    • Non-discriminatory social benefits.
    • Career plans based on merits and capabilities.

Training and development

Training is one of the key areas of the Naturgy People Model. The Naturgy training and development model is instrumented through the Naturgy Corporate University, as this is a strategic lever of transformation that serves the business to build the future, create value and achieve the goals set out in the Strategic Plan.

The Corporate University's mission is to help develop professionals that make Naturgy’s vision a reality and its aim is to ensure adequacy between the job position and the person, the acquisition of expertise linked to new needs of the organisation and the development of skills and abilities related to the Naturgy leadership and culture model.

Its advisory board guarantees a steadfast connection between the company’s strategy and the activity of the Corporate University. The board comprises representatives from the company’s senior management as well as external advisers from prestigious academic institutions.

The Corporate University has a quality management system pursuant to the ISO 9001:2015 standard, renewed in 2017 and with CLIP (Corporate Learning Improvement Process) accreditation from the European Foundation for Management Development (EFMD) since 2003 and last renewed in 2018 for a five-year period. This certificate recognises the quality of learning and development processes of people of corporate education organisations.

2018 has seen consolidation of the introduction of Evolution as an on-line training platform of the Corporate University and the evolution of the company’s new training model based on three levers: employee experience, personalisation of the training availableand centralised global operations.

The Corporate University’s management model responds to the training needs through its two academies:

  • The Tech Academy guarantees the transfer of specific technical knowledge in each business, thus permitting its efficient development and ensuring quality and uniformity in all countries.
  • The Transformational Leadership Academy, focused on transformation through the development of leadership of the executive, director and management team of Naturgy

Flexibility

Naturgy is committed to promote an appropriate work-life balance through a significant number of flexible employment measures, services and benefits adapted to employees' needs.

Global FRC certification

Naturgy is a benchmark of the new socio-labour and business culture. This is recognised in the Global Family Responsible Company (FRC) certification, obtained in 2013, renewed in 2016 for another three years and reviewed in 2017 and 2018, respectively. We were the first and only company to obtain this qualification issued by the Más familia Foundation. This certification is audited by AENOR, and is supported by the Ministry of Health, Consumer Affairs and Social Welfare.

This certification is an endorsement of the country-specific local measures on conciliation and development, but it also identifies 20 measures that are common to all of them and which are promoted at corporate level. Among these 20 measures, we can highlight those expressly related to the principles set out in the Global FRC Standard 1000/23 on time flexibility (flexible working day and paid leave); support to the personal environment (support to the family environment and spaces of integration between employees and relatives), personal development (with non-work integration activities), and job quality (use of technological tools to avoid travel, along with health, safety and well-being measures).

Time Bank

Naturgy provides its employees with a space, both physical and virtual, where they can delegate the performance of daily tasks in order to increase the free time they can spend on the most enriching aspects of their personal life. The range of services available to them is extensive and structured into three blocks:

  • Administrative tasks: advisory and assistance services for frequent administrative tasks
  • Advantages club: an exclusive virtual space with more than 500 offers.
  • Easylife space: outreach services and acquisition of products.

The Time Bank also offers services available on a quotation basis, such as technical services, courier services, returning clothes to stores and currency exchange, or special services provided during Christmas or back-to-school campaigns, among others.

In addition, in April 2018 we introduced the Easybox service which makes all of these tasks even easier and more flexible, through an interactive drop-point service and a website where users can request more than 20 different services, with the benefit of being able to deliver and collect at the most convenient time.

Access to these services is built into the My Benefits platform, on the corporate Intranet. Leadership and talent programmes have helped promote professional development and training, strengthening the human potential of the company.

Compensation and remuneration

Naturgy’s remuneration policy is governed by equity on an internal scale and competitiveness from the market point of view. There are two models:

  • The remuneration level of employees included in the collective bargaining agreement depends on the professional group and subgroup to which they belong.
  • For those employees not included in the collective bargaining agreement, it is established on an individual basis according to the remuneration policy approved by the Board of Directors’ Appointments and Remuneration Committee.

The remuneration package of Naturgy employees is supplemented with a social benefits system, which includes a pension plan, the main vehicle of funding post-employment commitments.

In the case of Spain, the Joint Pension Plan for Employees of the Naturgy group is a defined contribution plan for retirement and defined benefits in the event of death or incapacity whilst actively working.

The plan currently has assets totalling more than Euros 500 million, distributed among more than 6,300 active employees, and close to 2,000 beneficiaries.

On the international stage, the group’s retirement policy at all companies revolves around retirement savings instruments and coverage for death or incapacity while an active worker. These provide employees with benefits that complement the public systems of social security and are always introduced in accordance with the particular nature and needs of the social welfare issues of each country.

By the same token, the company provides a series of social benefits that supplement employee remuneration packages, irrespective of their type of workday.

Internal communication with employees

The purpose of Naturgy’s internal communication is to assist compliance with the company’s strategic goals, aligning the entire organisation and strengthening corporate culture and values.

Naturgy has a range of channels to disseminate these messages, such as the corporate Intranet, Naturalnet, and the magazine Natural, which is distributed internationally and the social network Yammer. In February this year the company set up a new channel, Naturalnews, which operates as the digital newspaper of Naturgy and provides information on the company’s latest news.

Labour relations

Respect for the freedom to join a union; fundamental rights; collective bargaining, and the agreement culture represent the key principles of what we do. Furthermore, we respect workers’ representatives freely elected in all countries where the company operates, and we have also introduced communication channels with these representatives as a major part of our corporate action principles.

The collective bargaining agreements include several communications channels with representatives, under the form of committees to deal with the many and varied aspects of general interest.

One of the mechanisms for consultation and employee participation are the regular health and safety meetings held in all areas of the company. This means that all employees have a channel of direct participation available to them through the joint meetings between management and employees, and 100% of the workforce is represented at meetings.

It should be noted that the holding of these meetings is to not replace the various health and safety committees required under labour legislation and which correspond to each country. The main issues, formerly dealt with during 2018 of these kinds of meetings with the workers’ representatives, were:

  • Health and safety commitment.
  • Analysis of the accident rate.
  • Launch of new regulations.
  • Comprehensive health.
  • Quarterly monitoring of measures.

Health and safety

What does it mean for Naturgy? Risks and management approach

Naturgy plans and carries out its activities with the firm belief that nothing is more important than health, safety and well-being of people. In this regard, the company’s action goes beyond compliance with legal obligations and other requirements that it voluntarily adopts, driving continuous improvement in working conditions and in management of health, safety and well-being. This not only involves people who work for Naturgy, but also suppliers, collaborating companies, customers and other stakeholders, in order to avoid and to prevent accidents and damage to health, providing a safe and healthy environment as well as promoting health and well-being.

A company with a high accident rate or which does not look after the health of its employees has to face the costs associated to the absence of these or to a reduction in its productivity. Furthermore, it could have a negative influence on attracting and retaining talent, as well as the perception of the company by its stakeholders.

What is our commitment?

How do we measure our performance?

Accident indicators 2018
Total
Accidents requiring sick leave (Nº of employees) 28 25 3
Days lost 1,524 1,497 27
Mortalities - - -
Frequency rate 1.00 1.30 0.35
Severity rate 0.055 0.078 0.003
Incidence rate 1.99 2.58 0.69
It does not include the information of Moldova, Kenya and South Africa. The accident rates including Moldova and South Africa are: No. of accidents with sick leave: 34, Days lost: 1,745, Mortalities: 1, Frequency rate: 1.138, Severity rate: 0.058, Frequency rate: 2.204.
Occupational illness
There have been no occupational illnesses registered in 2018.
Absenteeism
Lost Hours1
Spain 382,146
Chile 250,980
Argentina 33,912
Brazil 15,749
Colombia 3,160
Costa Rica 813
France 3,836
Kenya 1,072
Morocco 2,899
Mexico 9,840
Moldova 33,415
Panama 8,790
Peru 152
Dominican R. 3,184
South Africa 54,720
Uganda 313
Total 804,981
1 We have considered the hours of absenteeism for occupational illness and non-occupational illness, and the total number of hours worked in 2018 was 30,010,519.

What are our main milestones in 2018?

What are our goals for 2019?

goals for 2019

Horus: multi-factor analytical preventive analysis.

goals for 2019

Integra: exchange of best practices and learning through collaboration with collaborating companies.

goals for 2019

Kepler: ongoing innovation applied to prevention.

goals for 2019

Optimise the approach to cases of colon cancer.

goals for 2019

Optimise the approach to osteomuscular injuries.

Analysis of the 2018 results

Health and Safety Strategy

Safety as strategy guides the way in which Naturgy operates. Health and safety are key parts of the company’s business strategy, which is referred to as the “Health and Safety Commitment”, one of the major undertakings established in the Corporate Responsibility Policy. A common culture has been achieved in which all levels of the company, spearheaded by the Board of Directors, have acquired a firm commitment to continuous improvement in this area.  

The preventive culture of health and safety at Naturgy has consolidated itself thanks to the evolution in 2018 of the “Health and Safety Commitment” throughout the company. The actions at all levels of the organisation are based on the motto “nothing is more important than health and safety”.

Since 2017, the health and safety strategy has revolved around four pillars, leading to the development of different strategic objectives and goals to be achieved.

The Health and Safety Commitment Plan, implemented between 2012 and 2016, involved overcoming the implementation stage until we were able to reach the “Health and Safety Commitment”.

First of all, we analysed the initial situation, which allowed us to characterise the integration and management of the company’s commitment. Next, we established responsibilities for each one of the defined work areas and strengthened the management and dissemination tools. All this involved a major impulse for the new health and safety culture.

The definitive consolidation of the plan came about in 2016, with the “Health and Safety Commitment”. Achieving the commitment has involved integration of health and safety as an ongoing and stable value, taken into consideration by everybody that makes up the organisation.

This new approach has closed a cycle whose driving force has been the ongoing improvement into the daily life of the company, the increased efforts to achieve the desired objectives and the proposal for innovative initiatives.

These new steps of the strategy maintain the four lines of action of the “Health and Safety Commitment”: leadership, employees, collaborating companies, and facilities and processes, each one of which has its own “network” charged with spearheading development. Furthermore, the transversal networks continue working in the quest to provide support in areas such as communication, systems, training and corporate aspects.

The cultural change has served to transfer the company’s principles of health and safety to daily activity, and it reaches our collaborating companies and any new businesses that join Naturgy.

Strategic pillars

Strategic pillars

Consolidating health and safety as a strategic lever to align and to capture efficiencies.

Strategic pillars

Maintaining Naturgy as a worldwide benchmark in health and safety issues.

Strategic pillars

Drastically reducing the accident rate at collaborating companies.

Strategic pillars

Implementing the commitment in all countries where the company will have a presence.

Health and safety leadership

Leadership is considered the driver of cultural change in the company. This means efforts have to be made at all organisational levels, and promoted by the management, with a visible, solid and firm commitment in taking all decisions, with health and safety paramount at all times. Naturgy’s commitment to the target of zero accidents is strengthened through the involvement of senior management in the management of safety in all activities.

Senior management and the various committees have the tools necessary and the power to control and apply the appropriate measures in the event of any sign or anomaly concerning safety issues in all activities and geographies.

Risk prevention

Risk prevention

To ensure safety in the activities of Naturgy, measures aimed at preventing accidents and incidents have been introduced. Risk prevention is a key factor that governs business leadership and is supported on these principles:

This is the commitment of Naturgy and also the one that must be shared and applied by its collaborating companies.

Furthermore, we have also developed mechanisms to learn from events that occur and to avoid them in the future. These actions revolve around the main cultural axes of the company’s health and safety, the cornerstone of its commitment.

Risk assessment and management mechanisms

The process of occupational risk assessment aims to estimate the magnitude of those risks that could not be avoided. In these cases, the company obtains information for the adoption of effective preventive measures.

Naturgy uses a general procedure that applies to the entire group and which establishes the guidelines and principles to be followed for the identification, assessment and control of occupational risks. The following review periods are established:

  • Risk assessments every three years.
  • Yearly checks of the health and safety conditions.
  • Monitoring of preventive measures to be introduced as a result of the risk assessment and regular checks every quarter.

Prevention of risks at collaborating companies: suppliers, contractors and subcontractors

Naturgy acquires the undertaking to provide a safe working environment not only for its employees but for all those who make the activity of the company possible.

For this reason, the growth of involvement of the collaborating companies within the health and safety culture has been essential.

Safety is an indispensable condition of procurement for all collaborating companies and is taken into consideration in the assessment and award of tenders and bids. Furthermore, the criterion of red lines that cannot be crossed is applied, and if this rule is broken the contract can be terminated or the supplier’s approval withdrawn.

Naturgy develops other mechanisms designed to ensure that the safety level of collaborating companies is the same as for its own staff. In recent years an impact plan has been introduced for all collaborating companies of Naturgy. Among other things, this plan encompasses site inspections, the introduction of training itineraries, the application of Preventive Safety Observations, the creation of checklists prior to commencement of works and the planning of coordination meetings.

Training and awareness

The training of each employee in the prevention of occupational risks and industrial security associated with their job is the basic tool for achieving the target of reducing the number of occupational accidents. To provide adequate training, the company receives support in management from the Occupational Risk Prevention Classroom, a tool that the Corporate University has in order to comply with the goals established.

Certifications

As included in the strategic lines of the commitment, the certification according to health and safety standards enables consistency and standardisation of working conditions at Naturgy.

The company has a Global Certification Plan for the Occupational Health and Safety System; its aim consists of achieving global certification according to the OHSAS 18001 international standard. For its fulfilment, multidiscipline working parties were created as advised by the Prevention Service.

Safety audits and process diagnostics

To verify compliance with the country’s prevailing rules and regulations, Naturgy has conducted safety audits of the company’s different technical processes, of the technical procedures introduced by the group and the own internal regulations of the business unit. 

To contribute value to the business lines and to assist in the ongoing improvement of processes, there is monitoring and control of the operational risks concerning technology, accidents and malfunctions and impacts on the environment, and of the relevant management parameters.

As regards diagnostics, these are conducted on technical processes and on request by the different business units. The aim is to show the degree of control of the business, the monitoring mechanisms and, if anomalies are found, the appropriate actions for correction can be carried out.

Safety among customers and society

Naturgy conducts accident prevention campaigns for customers of the company, through giving advice that is communicated through the global communication channels. 

Additionally, the company uses the bills as a direct communication channel with customers. The company uses the bill as a way of introducing, inter alia: campaigns to raise awareness and information on specific actions concerning situations of risk, and campaigns that explain good use of devices and the maintenance of these.

Health

Naturgy is firmly committed to offering its employees a healthy working environment and well-being. The Comprehensive Medical and Health Assistance Unit is based on excellence and ongoing innovation to make available to employees, their relatives, collaborating companies, customers and the social environment in which the company operates, a global, health and welfare strategy that encompasses everything necessary for their benefit, both with regard to prevention, promotion and health care, in a customised way, as well as training and information with regard to healthy habits, taking into account both individual needs as well as the particular circumstances of each country.

Master Health Plan

This plan defines the strategic guidelines and establishes the general framework for action of Naturgy in the field of healthcare, ergonomics and psychosociology. The responsibilities under the plan correspond to each and every one of the business areas and countries within the group. In addition, comprehensive medical and health assistance services act as advisers for the development, monitoring and control of the plan in each of the areas.

Master Health Plan targets
Standardised actions Ensuring the health of workers, developing standardised actions respecting differences inherent in each country.
Compliance with regulations Monitoring compliance with the relevant regulations to each area in health.
Development of activities by external collaborators Coordinating the development of activities by external collaborators and establish monitoring and control measurements.
Definition of indicators Defining the indicators necessary to assess the implementation and development of the Master Health Plan, as well as all of the involved activities.
Continuous training Ensuring continuous training of professionals in the activity, information about the latest technological developments and promoting creativity for innovation.

Responsible supply chain

What does it mean for Naturgy? Risks and management approach

Suppliers and collaborating companies are key players in the optimum performance of the value chain of Naturgy, and the company therefore promotes relations based on trust, that are stable, sound and of mutual benefit, under the principles of transparency and risk management.

Naturgy establishes objective and impartial mechanisms of assessment and selection of suppliers, ensuring that the supply chain complies with the principles set out in the Supplier Code of Ethics, to which all suppliers have to adhere and the content of which comes from the Code of Ethics of Naturgy, from the Human Rights Policy, from the Health and Safety Policy, from the Anti-Corruption Policy, as well as the internationally acknowledged good governance principles.

The risks to the company extend beyond its activity, as it can be severely impacted by the inadequate performance of its suppliers and contractors in terms of the environment, health and safety, human rights, labour practices or corruption.

What is our commitment?

How do we measure our performance?

2018 2017
Total number of suppliers 8,670 9,877
Total purchase volume awarded (millions euros) 3,147 3,428
Number of ESG1 assessed suppliers 6,906 4,758
Number of critical suppliers 2,584 2,457
Official-approval suspended suppliers 1 7

Environmental, Social and Governance (ESG): The suppliers ESG assessment is conducted at the main subsidiaries of the group where the Achilles tool is implemented, and through which the business classification of suppliers is carried out.
NB: Two thirds of the overall amount awarded corresponds to service suppliers that fundamentally take part in the following business areas:
• Development and maintenance of grids, both natural gas and electricity.
• Operators and maintenance workers of energy plants.
• Commercial management services.
The remaining third corresponds to suppliers that provide materials required for the construction and maintenance of grids and plants, as well as those support services that complement the general activity
The development of this activity essentially takes place in the following geographical areas: Argentina, Australia, Brazil, Chile, Costa Rica, Spain, Kenya, Morocco, Mexico, Moldova, Panama, Peru, Dominican Republic and South Africa.

The evolution of data with regard to 2017 reveals a decrease in the purchase volume, number of suppliers and number of suppliers assessed. The decrease of the purchase volume is fundamentally due to the divestment in Italy, in some companies in Colombia (those that represented the highest volume) and to a lower business volume in Mexico (Euros -135 million) and Australia (Euros -85 million). In general, there has been a decrease in the remaining countries except Chile, which in 2018 contributed a higher amount (Euros 160 million more) through business growth.

As regards the number of total suppliers and suppliers assessed, the change is due to the removal of Italy and the companies in Colombia, and the increase of critical suppliers is due to the entry of new suppliers in Chile through business growth generally associated to critical activities.

What are our main milestones in 2018?

What are our main milestones in 2018?

What are our main milestones in 2018?

What are our main milestones in 2018?

What are our goals for 2019?

What are our goals for 2019?

Quarterly monitoring of approved suppliers based on reputational ratings, economic-financial and Corporate Social Responsibility from external data sources.

What are our goals for 2019?

Implementation of the risks matrix updated throughout the group.

Analysis of the 2018 results

The supply chain of Naturgy

Suppliers, contractors and outsourced partners are key players in the optimal functioning and sustainable management of the value chain, demonstrating Naturgy’s commitment as an efficient, responsible and innovative company, in a process of continuous improvement that guarantees safety, reliability and competitiveness of the supply chain.

In 2018, Naturgy set up trade relations with a total of 8,670 suppliers which accounted for a total expenditure of Euros 3,147 million.

Naturgy performs the procurement of works, goods and services, as well as the assessment, monitoring and development of suppliers in accordance with the general principles established in the company’s policies, rules and procedures, as well as internationally recognised principles of good governance, ensuring a uniform, efficient and sustainable model.

The main goals of Naturgy in terms of sustainability with respect to the supply chain are:

  • Extend the corporate culture to the supply chain in a sustained way, passing on the objective of excellence in service.
  • Guarantee sustainable management of the supply chain in an ongoing way, safeguarding the group’s reputation.
  • Promote continuous improvement and drive the development of suppliers by identifying opportunities for collaboration and innovation.
Values transmitted

Values transmitted - Transparency

Values transmitted - Integrity

Values transmitted - Sustainability

Values

Management of the supply chain

Purchasing model

The Purchasing and Supplier Management Model introduces a management process with unified and overarching criteria for Naturgy’s entire scope of operations. The corporate unit is responsible for defining the policy, general principles and the model of application and for ensuring compliance. The business units develop, implement and ensure traceability of the processes of contracting and management of suppliers, applying the established principles.

We encourage the aggregation of demand in purchases in which there is a single supplier market that covers most of the group’s business needs and countries. In the remaining cases, the contracting of suppliers from the country or region where the company performs its activities is encouraged, supporting the generation of a positive social impact through the creation of wealth and investment in the local community, generating economic inclusion in the company’s spheres of influence.

Transparency in purchasing

In terms of procurement, Naturgy is committed to ensure free competition, objectivity, impartiality, transparency and traceability throughout the procurement process.

The use of secure electronic means, the Jaggaer Advantage platform, for management of all bids brings greater transparency to the procurement process and ensures information traceability. In addition, communication channels have been established with the supplier that facilitate access to all the information necessary for their participation in the procurement processes.

Naturgy actively participates at associations, national and international fairs on supply chain management. In this regard, the company is member of the Association Representing Purchasing and Materials Management Professionals in Spain (Aerce) and RePro in Argentina, Brazil, Chile, and Spain.

Furthermore, the company subscribes to the worldwide Procurement Leaders network and in 2018 took an active part in the CPOnet Congress.

Human rights at suppliers

Naturgy has a Human Rights Policy that extends to the supplier’s Code of Ethics, thus transferring to the supply chain the commitment to protect Human Rights within their sphere of influence, especially since international growth has led us to operate in some environments where their protection takes on special relevance.

Supplier Code of Ethics

Naturgy is keen to extend the corporate culture to the supply chain, ensuring that collaborating companies comply with the principles set out in the Supplier Code of Ethics, which all group suppliers have to adhere since 2016.

Reporting Channel

All suppliers, contractors and outsourced collaborating companies of Naturgy that wish to report a violation of the Code of Ethics that they may have observed in the exercise of their functions may contact the Code of Ethics Committee through the email address published in the Naturgy Supplier’s Code of Ethics.

Supply chain management process

In order to promote responsible management in the supply chain, Naturgy has a comprehensive purchase process, with application of unified and universal contractual conditions for the company’s entire sphere of operation and which is publicly available on the Naturgy website “The group’s general procurement conditions” and where supplier management is of vital importance.

Supply chain management process

Risk management of the supply chain

The risk factors of the supply chain are elements, conditioning factors or situations inherent to the same and which are considered significant in achieving our goals. 

Risk factors assessed

Health and safety: this measures the potential risk of an incorrect action, service and/or product fault with regard to the life or physical integrity of persons.

Quality: the impact that breach by the supplier with regard to the expected or agreed quality levels would have at Naturgy.

Enviromental, social and corporate governance (ESG): this measures the existing risk of purchasing products or contracting services that are not environmentally friendly, which are manufactured or generated under socially unfair conditions, or using labour practices that are ethically incorrect. Naturgy performs “responsible purchasing” through a management process that encourages the acquisition of products and services that are environmentally friendly, and which are manufactured under socially fair conditions.

Operational risk: the potential impact on operations incurred by Naturgy as a consequence of a lack of continuity in the supply of a good or service by suppliers that have been awarded contracts.

Legal risk: possibility of infringements and breaches by providers of laws, rules and practices that apply to them.

Assessment of suppliers

Assessment of suppliers is introduced in the processes of Business Classification of suppliers and Approval of suppliers and products.

Assessment of suppliers

With the risk evaluation of the purchase categories that are managed worldwide and assessing the risks of the countries where the company usually contracts, we obtain the risk of each purchase category in accordance with its activity and the country where the activity is conducted. This combination allows us to assign a high, medium or low risk to each purchase category, which is integrated into the map, thus obtaining the risk of each purchase category by country. Suppliers with a high level of risk in any of the assessed risk factors associated with the purchase categories they supply will be considered by the company as critical suppliers. Naturgy also identifies the “suppliers with high risk in sustainability”, considering those that reveal a highrisk level in the Health and Safety and ESG factors.

Supplier classification

This process is based on the assessment of compliance at business level of what is required by Naturgy in the different risk factors, in order to participate in the procurement process of goods and services. All suppliers must pass this process before maintaining commercial relations with Naturgy.

The classification is conducted using self-assessment questionnaires that take into consideration legal, economicfinancial, criminal, solvency, experience, business organisation, quality, safety, human rights, environmental, social and employment practices criteria.

Official approval and management of supplier quality

Naturgy has introduced the goal whereby all suppliers that perform critical activities through being defined with a high risk in any of the ESG, quality and health and safety risk factors must be approved.

The approval process is based on audits conducted at the supplier's facilities or by distance depending on the critical nature, to check compliance with the specific requirements defined for the service or material. Any noncompliances detected during the audits lead to corrective actions that the supplier must introduce within the deadlines agreed between Naturgy and the supplier, and this deadline is always less than one year.

Naturgy also approves the Non-Tier 1 suppliers corresponding to categories of purchase of critical products, over which audits are conducted based fundamentally on quality-related aspects.

Products corresponding to critical categories may be subjected to inspections, technical acceptances or FAT at the production centres before the material is shipped.

Every year approval plans are drawn up to audit suppliers in-situ. These approvals are for an open-ended period depending on the critical nature of the service or product and the purchase volume.

The approval process may unveil anomalies that lead to a plan of corrective actions, or the non-approval of the supplier, which would prevent such supplier from performing this activity for Naturgy.

The corrective action plan identifies the development actions and corrective actions to be introduced to achieve compliance with the requirements and standards established by the company.

During 2018 one supplier was suspended and disqualified from holding a contractual relationship with Naturgy for significant breaches related to security, quality and other aspects.

Monitoring, follow-up and development of suppliers

The Supplier Code of Ethics sets out that suppliers must take the utmost care to preserve the image and reputation of Naturgy in their professional actions and to monitor the respect and proper use of Naturgy' image and corporate reputation by its employees and that of its subcontracted companies.

In addition, other analyses based on reputational risk and corporate social responsibility are carried out with suppliers assessed as suitable at the high-risk level.

In 2018 no supplier was disqualified on the grounds of fraud or unethical practices.

Performance follow-up is carried out on the most relevant suppliers with a contractual relationship with the company and this involves carrying out surveys with the Naturgy units to measure their level of satisfaction with the suppliers.

Regarding the development of suppliers, one of the most important aspects is to extend Naturgy’s culture to the supply chain, performing actions that allow the company’s values to be transferred.

During 2018, Naturgy continued to form part of Bettercoal, an initiative launched by the main European utility companies for the purchase of coal from suppliers that comply with a series of social, environmental and corporate governance criteria, and was represented on its Board of Directors. Over the year, 94% of coal purchased by Naturgy was from mines that had agreed to follow an evaluation process with regard to these criteria.

Social commitment

What does it mean for Naturgy? Risks and management approach

Naturgy is committed to the economic and social development of those regions where it performs its activities, providing expertise, management capacity, as well as spending part of its profits on social investment. Fluid and ongoing dialogue with society enables to be aware of the expectations and interests of those communities where it operates and thus be able to involve itself in their development.

Inadequate management in access to energy can cause significant costs through non-payments and theft of electricity. By the same token, depriving vulnerable groups from receiving energy could have an impact on the company’s reputation.

The lack of involvement and participation with local communities and their needs in those territories where the company operates could result in rejection and unease in the community, which could lead to lobbying for the company to cease its operation in these territories.

What is our commitment?

How do we measure our performance?

How do we measure our performance?

What are our main milestones in 2018?

What are our main milestones in 2018?

What are our main milestones in 2018?

What are our main milestones in 2018?

What are our goals for 2019?

To continue promoting the Energy Vulnerability Plan.

Approval of the General Procedure of Sponsorship and Donations and its introduction in all countries and societies.

Smart energy and mobility to improve air quality.

Analysis of the 2018 results

Economic value distributed (euros million)

Economic value distributed

Sponsorship and social action investment

Economic contributions to social investment and sponsorship programmes are another important part of the Naturgy commitment. In 2018, they totalled Euros 11 million.

The aim of the company is to generate a higher corporate commitment to society of which it forms a part. The programmes to which these resources are therefore allocated form part of the business development strategy.

Creation of wealth and well-being where the company operates

Naturgy develops its commitment to society through four main lines of action that are aligned with the company’s core activities:

1. Energy vulnerability

Naturgy performs its activity in areas where the energy supply does not reach the entire population. The company considers it a priority to reach the people that live in these areas. This is why it actively works in developing its distribution networks to offer these populations a service under safe conditions.

The company has extensive experience in this regard. Accordingly, the project carried out at Cuartel V in Argentina or the CGE group agreement in Chile made it possible to provide access to clean and reliable energies to tens of thousands of people.

Energy Vulnerability Plan in Spain

During 2018, Naturgy, together with the Foundation, continued the development of the Energy Vulnerability Plan throughout Spain to protect vulnerable customers. The plan has become a new core focus; the actions to mitigate energy poverty are now a priority for the Foundation.

The objectives of the plan are:

  • Improve management and customer relations in cases of energy vulnerability.
  • Streamlining the exchange of information with town and city councils for better identification of situations of vulnerability
  • Implementing activities with associations that work to alleviate energy poverty cases and to detect vulnerabilities.
  • During this year there have been three new initiatives:

  • Creation of the Energy Rehabilitation Solidarity Fund, to finance improvements at vulnerable homes through donations from individuals and a contribution from the Foundation.
  • Job Circle project: commencement of a training course to refurbish 15 homes, performed by long-term unemployed persons with an undertaking from the companies to recruit 25% of course participants.
  • Social entrepreneurs: we have strengthened the corporate volunteer programme with this initiative, the purpose of which is to enable Naturgy employees to encourage initiatives promoted by not-for-profit organisations and which are related to energy (energy poverty, energy efficiency) and the environment.

2. Relationship with communities

Naturgy, under its Human Rights Policy, makes a firm commitment to the respect of local communities. To achieve this commitment, the social impact that the company activities may have on affected communities and contributing to improving the living conditions of these communities are key aspects.

Naturgy has a method based on the Measuring Impact methodology of the World Business Council for Sustainable Development (WBCSD) and the aim is to define initiatives and programmes for the effective management of social impacts associated with the company’s business.

The company bases its relationship with communities on the following principles:

  • Identifying communities affected by the company’s activity and finding out their needs and aspirations.
  • Analysing the potential environmental and social impacts that its activity could cause in the communities, using the social impact assessment methodology designed for this purpose.
  • Reporting to, and inviting participation from, the community at the different stages of the project through a consultation procedure that enables us to listen to their concerns and questions as well as benefit from their contribution.
  • Incorporating the opportunities identified through dialogue with the communities and which encourage sustainable development of the community into the impact assessment studies.
  • Introducing a system of communication and relations with communities that ensures that these communities receive project information in a clear, updated and efficient way.

The company currently prioritises the performance of social impact assessments in those locations where the company is looking to carry out new investment projects. These assessments serve to measure numerous impacts (positive and negative) that the company may produce as a consequence of its activity, both in local communities as well as in the territory. These include:

  • Impact on human rights.
  • Displacement or relocation of local communities.
  • Modification to the traditional ways of life.
  • Changes in the traditional uses of territory.
  • Attracting new technologies.
  • Creation of skilled and unskilled jobs.
  • Temporary occupation of the communication routes.
  • Impact on landscapes.
  • Noise.

The most prominent projects in this sphere are:

  • Bujagali hydroelectric power station (Uganda): with local procurement programmes, development of suppliers, health and prevention, training and the fight against energy poverty.
  • Bií Hioxo wind farm (Mexico): with actions to support fishermen, improve highways and delivery of material, support to the fire brigade, health campaigns, improved education infrastructures, support to culture and technology and guided tours of the wind farm.
  • Nairobi thermal power station (Kenya): with education support programmes, health campaigns, environmental protection and promotion of art and local culture.
  • Torito hydroelectric power station (Costa Rica): with support to local schools with the supply of academic material. As well as improvements along the local roads surrounding the power station.
  • La Joya hydroelectric power station (Costa Rica): with support to local schools with the supply of academic material.
  • CGE (Chile): development of a plan to encourage relations with social organisations to foster their links with neighbourhood councils, through participatory meetings.

During 2018 we started implementation of the Quilombola Basic Environmental Project (QBEP), associated to the Sobral I photovoltaic plant in the municipality of São João do Piauí (Piauí, Brazil) as a measure to mitigate and offset the impacts this facility could cause in the local communities of the territories of Riacho dos Negros and Saco/Curtume. To carry out this project, we mobilised a social manager responsible for channelling ongoing communication between the company and the local community, supporting the introduction of the measures developed in the QBEP.

The project involves 4 action lines and 12 activities, of which the following have been implemented this year:

  • Mobilisation of the social technical team required to undertake ongoing communication with the community, and introduction of the QBEP measures.
  • Meetings and workshops to disseminate and gather information
  • Collection of information about wells in the region that could be improved with the set-up of a solar pump kit.
  • Collection of information on the needs and expectations of technical and higher training for young people in the region.

3. Social action

In 2011, when the Latin America Operational Centre was created, pillars were established, and social investment programmes designed for unified development in all countries where the company has a presence.

Types of COIL projects

Inclusive business

Projects that promote the inclusion of the most disadvantaged social sectors through inclusive programmes. For this project type, we continued with the programme called Energy of Flavour, launched in 2016, which aims to promote social inclusion of disadvantaged groups through training linked to gastronomy

Through the Training Classrooms programme we offer a training workshop on the ceramics technique which since last year has integrated persons with mild intellectual disability.

Responsible consumption

Encompasses projects targeted at providing knowledge about energy in general, safety and efficient use, of both gas and electricity. They also promote environmental stewardship among customers and society. As part of this pillar, the following traditional programmes were carried out:

  • Responsible Consumption of Gas, in versions for children and adults.
  • Responsible Consumption of Electricity, in versions for children and adults.

In 2018 we created the Sowing the Future programme through which we created a vegetable garden at a school in Buenos Aires together with the students. To achieve this, the students were trained and instructed in the acquisition of expertise and the development of theoretical and practical skills to be able to set up the vegetable garden and maintain it over time.

Talent promotion

This pillar promotes projects that foster the studies and access to employment for the children and relatives of collaborators:

  • The "Planning your Future" programme provides a financial grant for those who are starting college
  • "Natural Vocation" seeks to contribute to the vocational and professional decision process that relatives of collaborators go through.
  • "Summer Internship", offers the possibility of work experience in the company in the summer months

4. Sponsorship, patronage and donations

The resources assigned to cultural, social and environmental programmes pays special attention to those community projects that generate greater value for society, while also strengthening the company’s commitment to positive integration in each community and country where the group operates.

Through the General Regulations on Sponsorship and Donations of the company, the general management principles are established for sponsorships and donations by the company and to define the processes that regulate and control its development. Similarly, activities related to sponsorship and donations are subject to a process of 100% transparency. The regulations also provide priorities, which can be summarised in social action, culture and energy, and the environment.

  • Educational initiatives: Naturgy carries out educational activities for young people on the correct use of energy and sustainable development. By the same token, the company implemented a wide range of collaboration, participation and sponsorship initiatives with different educational entities in Spain and Latin America.
  • Social action focused on underprivileged groups: the company drives, and support projects targeted at integrating the most vulnerable social groups and to mitigate problems stemming from social exclusion. It therefore collaborates financially with foundations and associations whose corporate purpose is to help mitigate or minimise these problems in some of the countries where it performs its activity.
  • Promotion of health and research: among the different programmes in which Naturgy participates to promote research and health, we can highlight research targeted at improving the life quality of the infirm and their relatives, or research into cardiovascular diseases, which are the leading cause of mortality worldwide, through the Procnic Foundation, as well as with other international entities.
  • Promotion of music, theatre and films: Naturgy maintains its undertaking to contribute towards the development of culture that goes beyond its business activity and which involves extensive sponsorship work in initiatives that generate high value for society. We sponsor musical cycles and artistic seasons of different institutions throughout the territory.
  • The company’s support to the Gran Teatre del Liceu and the Teatro Real have been strengthened with twin celebrations declared to be "events of exceptional public interest".

Corporate volunteers and employee participation

Through corporate volunteering, Naturgy aims to promote social cohesion, values and a spirit of solidarity.

To achieve this, Naturgy has defined the programme objectives in three areas simultaneously -corporate, employees and the environment-, and an integrated structure of committees that includes both the areas of people as well as communication and the environment of all countries that form part of the programme.

During 2018, the company has promoted environmental, social and energy volunteer actions, in which employees contributed their time and their personal and professional skills.

Naturgy Foundation

The Naturgy Foundation, founded in 1992 by Naturgy, and with a presence in those countries where the company is active, is tasked with the dissemination, training, information and raising society's awareness in issues of energy and the environment, as well as the development of business and academic programmes. It also develops social action programmes in the national and international arenas, with a particular focus on actions targeted at relieving energy vulnerability.

During 2018, the foundation continued to provide seminars on energy and the environment in Spain, as well as presentations of the book Air quality in cities. A worldwide challenge; taking advantage of the presentations to give temporary exhibitions about air quality in Barcelona and Guadalajara. There was also an exhibition about "Smart Ports" in Malaga. One new item this year has been the commencement of two new action lines as part of the "energy and technology" and "smart energy and mobility" sphere.

In 2018, to once again drive its educational activity and provide access to its teaching programme throughout the territory, the Foundation turned the Gas Museum into a travelling one. This allowed us to multiply the Foundation’s participation throughout the year in a great many anniversaries related to education of technology in the energy sphere, through innovative and flexible agendas adapted to all kinds of audiences.

The international activities of the Foundation were developed in seven countries: Algeria, Argentina, Brazil, Chile, Morocco, Mexico and Panama.

Integrity and transparency

What does it mean for Naturgy? Risks and management approach

Naturgy considers that the trust of its stakeholders is based on integrity, which is understood to be action which is ethical, honest, responsible and in good faith of each one of the people who work in and for the group.

To respond to the risks related to integrity and transparency, Naturgy has developed a series of mechanisms that introduce the guidelines that are to cover ethical and transparent behaviour of the directors and employees of the company and their daily performance, as set out in the Code of Ethics, the Anti-Corruption Policy, the Human Rights Policy and the Fiscal Policy of Naturgy.

Corruption, fraud and bribery can have a major impact for the company, leading to sanctions imposed by the administrations, loss of contracts, legal consequences, loss of customers and loss of reputation that could also see investors disappear or the non-purchase of shares by investors that consider these aspects in their investment decisions.

What is our commitment?

How do we measure our performance?

Queries and notifications to the Code of Ethics 2018 2017
Queries 76 37
Notifications 123 104
Total 199 141
No. of messages received per 200 employees 3.18 1.67

What are our main milestones in 2018?

Analysis, content design and drafting of the Conflict of Interest Policy. Launching of the Compliance Communication Plan

What are our goals for 2019?

Approval and dissemination of the Conflict of Interest Policy.

Update of the Corporate Responsibility Policy.

Audit the implementation of the Human Rights Policy.

Approval of update of the Human Rights Policy text to concepts and terminology of the United Nations Guiding Principles on Business & Human Rights.

Analysis of the 2018 results

Code of Ethics Management Model

The Code of Ethics of Naturgy, formulated and approved by the Board of Directors, is the document that establishes guidelines that must govern the ethical behaviour of managers and employees of Naturgy, in their daily work, with regard to relationships and interactions with all its stakeholders. The principles for the company’s employees are related to corruption and bribery, respect for people, professional development, equal opportunities, relation with collaborating companies, occupational health and safety, and caring for the environment, among others.

Since 2005, when it was adopted, the code has been regularly renewed to adapt it to the new situations that affect the company. The code sets out the undertakings entered into by Naturgy in the fields of good governance, corporate responsibility and questions of ethics and regulatory compliance.

In addition, Naturgy has an Anti-Corruption Policy, which establishes the principles which must be used to guide the conduct of all employees and administrators of the companies of the group with regard to the prevention, detection, investigation and correction of any corrupt practice within the organisation.

This model also provides that the Audit Committee of the Board of Directors must receive regular reports from the Ethics and Compliance Committee on the most relevant issues related to the dissemination of and compliance with the Code of Ethics and the Anti-Corruption Policy. The Ethics and Compliance Committee, which in 2018 has fully assumed the functions that were previously performed by the Code of Ethics Committee, is responsible for supervising the dissemination and compliance with the Code of Ethics and the Anti-Corruption Policy through supervision and control of the safeguard systems:

  • Whistleblowing channel (the "Code of Ethics Channel"), through which all the employees and suppliers can send the Ethics and Compliance Committee queries or notify breaches of the code, in good faith, in a confidential manner and without fear of reprisal.
  • Annual declaration procedure: through which all the employees repeatedly declare that they have read, understood and comply with the code.
  • Online courses: on the issues included in the Code of Ethics and the Anti-Corruption Policy, mandatory for all employees. Certain groups of employees also receive classroom training sessions on a range of issues in the sphere of regulatory compliance, which include the content of the Code of Ethics.

In 2018, 24% of the notifications received were related to alleged fraud, none of which had any significant impact.

No notifications were reported related to labour or child exploitation or in relation to the rights of the corresponding local communities and human rights.

A total of 24% of the notifications were related to the people management, and they were all solved appropriately

In 2018, it was not necessary to repair damages relating to impacts caused by human rights cases.

In 2018, the work plan of the Ethics and Compliance Committee included:

  • Project to improve the Code of Ethics Channel.
  • Training and informative actions on the Code of Ethics, Anti-Corruption Policy and Corporate Hospitality Policy, targeted at the company’s employees.
  • Collaboration with the Supply Unit to introduce improvements in communications and supplier evaluation related to compliance with the Code of Ethics.
  • Updating of the Code of Ethics.

The company has introduced local committees in countries where the company has the greatest activity. The main mission of these is to make everyone aware of the Code of Ethics and the Anti-Corruption Policy and to reproduce the functions the committee carries out in Spain in each country to cover the company's entire sphere of operation.

Code of Ethics chapter to which notifications refers (%)
Queries Notifications Total
Respect for the law, human rights and ethical values 3 3 6
Respect for the individual 1 35 36
Professional development and equal opportunities 2 13 15
Cooperation and dedication - 2 2
Occupational health and safety - 2 2
Corruption and bribery 17 23 40
Use and protection of assets - 3 3
Irregular payments and money laundering - - -
Corporate image and reputation 2 1 3
Loyalty to the company and conflict of interest 30 13 43
Processing of information and knowledge 3 1 4
Customer relations 13 14 27
Shareholders relations - 1 1
Relations with collaborating companies and suppliers 5 10 15
Respect for the environmente - 2 2
Total 76 123 199

Crime Prevention Model

The company has a Crime Prevention Model which is updated annually. Thus in 2018, the model was subject to a process of adaptation to the new organisational structure in force at Naturgy.

The model incorporates the already established Naturgy internal control structure. Its purpose is to effectively prevent the occurrence of offences under the Organic Law 5/2010 governing the Amendment of the Penal Code. This modification introduces in Spain the criminal responsibility of artificial persons in cases in which they do not exercise due control over the systems of individuals subject to their authority.

The model contains 18 crimes that have been identified, together with definitions of their impact and probability of occurrence, mechanisms for their control and minimisation, and responsibilities with regard to their fulfilment.

Worldwide, the group has deployed crime prevention models in countries with laws governing the civil liability of legal persons.

During 2018, we have continued with the online training course mandatory for all employees on the Crime Prevention Model, the Code of Ethics and the Anti-Corruption Policy in order to emphasise the importance of compliance, ensure implementation of preventive and control activities and to inform all employees of the current status in these matters.

Anti-fraud and anticorruption policies and plans

Although fraud and corruption are covered in the crime prevention system, the company worked to improve and update its internal regulations and define specific protocols and mechanisms in this area.

The Naturgy Anti-Corruption Policy complies with national and international legislation on corruption and bribery.

This policy has the object of establishing the principles which must be used to guide the conduct of all employees and administrators of the companies of Naturgy with regard to the prevention, detection, investigation and correction of any corrupt practice within the organisation. It covers all the actions in this area and avoid conduct that may give rise to fraud or corruption and lead to situations that are damaging for the company, its administrators and employees from a legal point of view or in relation to its reputation.

The policy establishes 14 principles of action, including aspects such as promoting integrity and transparency in the processing of information, money laundering, conflicts of interest and relationships with third parties.

The focus of the Naturgy Anti-Corruption programme covers three key areas:

  • Establishment of an anti-fraud and anti-corruption culture through training and awareness.
  • Implementation of proactive measures to assess the risk of fraud and corruption, monitoring and controls.
  • Development of measures and response plans in the event of situations that constitute fraud and corruption.

These plans and measures include the investigation of the episodes, the definition of solutions and the establishment of disciplinary measures.

Naturgy organises regular training initiatives based on the programme with the aim of raising awareness of the importance of fighting against corruption and ensuring that administrators, employees and suppliers are given enough and appropriate information to act accordingly.

Some of these regular initiatives include the following:

  • Update of the NaturalNet space which concerns the Code of Ethics and the Anti-Corruption Policy.
  • Publication of information about the Ethics and Compliance Committee activities (notifications received, activities carried out, etc.).
  • Training course on Crime Prevention Model, Code of Ethics and Anti-Corruption Policy.
  • Specific training in relation to the Crime Prevention Model and Anti-Corruption Policy for new employees and administrators.
  • Presentations in Boards of Directors and Management Committees of the Crime Prevention Model.
  • Regular declaration of compliance with the Code of Ethics and Anti-Corruption Policy.

Likewise, Naturgy has introduced a Corporate Hospitality Policy, within the framework of the Code of Ethics and the Anti-Corruption Policy. The purpose of this policy is to regulate the conditions in which the directors and employees of Naturgy can accept/offer business courtesies from or to their business counterparts within the framework of performing their professional duties, to ensure effective compliance with the principles set out in the Code of Ethics and in the Anti-Corruption Policy of Naturgy.

The directors and employees of the group cannot accept or offer, whether directly or indirectly, business courtesies for the purpose of improperly influencing their commercial, professional or administrative relations, whether with public or private entities.

In 2018 there was a specific dissemination campaign concerning the Corporate Hospitality Policy, targeted at all employees and, in addition, one of the modules of the "Compliance Café" campaign carried out in the same year was exclusively dedicated to this Policy.

In addition, in all operations involving risk, the company conducts due diligence processes systematically, both for high-risk suppliers, and company relationships with third parties (partners, joint ventures, etc.).

The counterparty due diligence procedure aims to ensure that, across the board, reputational risk and corruption are analysed and assessed efficiently and in a standard way when third parties intervene in business relationships of the companies forming the group.

Naturgy has the mechanisms, procedures and policies that seek to prevent and, where appropriate, detect and react to those possible breaches in the area of prevention of money laundering that are detected in the performance of its activity.

We can divide these measures into three control levels that seek to prevent, detect and, if appropriate, react to money laundering:

  • Prevention: both the Naturgy Code of Ethics as well as its Anti-Corruption Policy have specific sections that expressly establish the prevention of money laundering as one of the principles that presides over the operations of the company and all of its employees. All Naturgy employees receive training on the content of the Code of Ethics, the Anti-Corruption Policy and the conduct guidelines that they must heed.

    In addition, Naturgy has other more specific policies and procedures that establish a full series of controls in its day-to-day work and in the operations it performs, which encompass the prevention of money laundering. Key among these are the counterparty due diligence procedure; the general external procurement standard; the procedure on granting the signing level, or the internal control procedure for the processing of payments and cash movements, among others.

  • Detection: some of the foregoing policies and procedures also allow the risk of money laundering to be detected.

    Every year, those in charge of controls at Naturgy are subject to a self-assessment in the Crime Prevention Model on compliance with the same, including those where there is a risk of potential money laundering. In addition, to ensure efficiency of this model, it is reviewed regularly and audited every year by an independent expert.

    Internal Auditing periodically reviews the different processes of Naturgy to detect possible breaches that may have occurred in the different operational risks. These reviews include checks of revenue and payments that may be subject to the risk of money laundering.

    Naturgy also has an Internal Control System on Financial Reporting that is audited every year by an independent expert.

    In addition, Naturgy provides both its employees as well as stakeholders with channels so they can report to the Ethics and Compliance Committee concerning any breach or irregular or suspicious conduct in this area. They can perform these communications through the website channel of the Naturgy Code of Ethics or through ordinary or internal mail. In addition, in accordance with what is permitted under new data protection legislation, these communications may be carried out anonymously.

  • Reaction and response: Naturgy has an investigation and response protocol as well as a disciplinary system so that, if it becomes aware of any denouncement or irregularity it can introduce all measures within its reach to rectify this and, if appropriate, adopt the measures required to prevent future repetition. Furthermore, Naturgy collaborates with the competent authorities of each country in the fight against money laundering and the financing of terrorism, furnishing all the information they request in accordance with prevailing regulations. The company also reports any suspicious transactions.

Tax policy

Tax strategy and tax risks control and management policy

At a meeting on 9 January 2018, the Board of Directors approved the Tax Strategy and Tax Risks Control and Management Policy, which sets out the basic principles governing Naturgy's tax function and the main lines of action to mitigate and guide proper control of tax risks.

The basic principles governing Naturgy's tax strategy are as follows:

  • Responsible compliance with tax obligations.
  • A low tax risk profile.
  • Adoption of tax treatments based on economic reasons.
  • Transparency of tax information.
  • Cooperation with the tax authorities.

The main lines of the Tax Risks Control and Management Policy are as follows:

  • Tax governance clearly defined.
  • Procedures for controlling the tax risk arising from compliance.
  • Procedures for assessing and controlling tax approaches where there is uncertainty.
  • Oversight of the performance of the Tax Control Framework.
  • Regular reporting of the tax situation to the Board of Directors.

All of Naturgy's tax policies are aligned with:

  • The Naturgy Corporate Social Responsibility Policy, in which one of the commitments and principles of action is to "adopt responsible business management practices and comply with all tax obligations in all jurisdictions in which the company operates, accepting the commitment to accountability and collaboration with the corresponding tax agencies."
  • Naturgy's Code of Ethicsy, which establishes that "All employees of the group must comply with the laws in force in the countries where they conduct their activities, thereby heeding the spirit and objectives of the laws and behaving ethically in all their actions".
  • The Code of Best Tax Practices (CBTP), approved on 20 July 2010 by the Plenary session of the Large Business Forum, a body established by the Spanish National Tax Agency with Spain's largest companies, including Gas Natural SDG, S.A. The CBTP contains recommendations by the tax authorities, which Naturgy has adopted voluntarily, that are aimed at improving the application of the tax system by enhancing legal certainty, reducing litigation, fostering mutual cooperation based on good faith and legitimate trust, and the application of responsible tax policies.

To align Naturgy's tax policies with these principles, the group has a General Regulation governing the Tax Control Framework, designed in accordance with the guidelines of the Organisation for Economic Cooperation and Development (OECD) for multinational enterprises, and for the design and implementation of a Tax Control Framework.

Naturgy also has a Risk Map that specifically identifies the tax risks and issues regarding the interpretation or application of tax law. The main matters with a tax impact are detailed in Note 21 "Tax situation" in the notes to the Consolidated Annual Accounts.

Tax havens

The incorporation or acquisition of undertakings domiciled in countries or territories designated as tax havens must be reported to the Board of Directors via the Audit Committee.

At 2018 year-end, the Naturgy Group did not have any company in a territory designated as a tax haven under the related Spanish regulations (Royal Decree 1080/1991, of 5 July, and Royal Decree 116/2003, of 31 January).

Buenergía Gas & Power, Ltd. (the company that indirectly owns a single industrial holding that engages in power generation using a combined cycle gas turbine in Puerto Rico (Ecoeléctrica, L.P.)), which was domiciled in the Cayman Islands and in which Naturgy holds a 95% stake, changed its domicile to Puerto Rico on 2 February 2018.

Gasoducto del Pacífico (Cayman), Ltd. (a dormant company acquired by the group as part of the CGE acquisition), which was domiciled in the Cayman Islands and in which Naturgy held a 52.2% stake, was liquidated on 12 January 2018 and dissolved and deregistered on 12 April 2018.

Tax contribution

Naturgy gives priority to fulfilling its obligation to pay the taxes that are due in each territory in accordance with the applicable regulations.

Naturgy's total tax contribution amounted to Euros 3,268 million in 2018 (Euros 3,272 million in 2017). The following table shows the breakdown of the taxes actually paid by Naturgy in each country, segmented into those that represent an actual expense for the group ("own taxes") and those that the company withholds from or charges to other taxpayers (third-party taxes):

Tax contribution (Euros million)
Own taxes Third-party taxes
Country Income tax1 Others2 Total VAT Tax on
hydrocarbons
Otherssup3 Total Total
2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017
Spain 62 112 621 537 683 649 1,056 845 409 342 270 228 1,735 1,415 2,418 2,064
Argentina 10 15 17 67 27 82 9 19 - - 39 34 48 53 75 135
Brazil 52 51 46 67 98 118 73 74 - - 13 7 86 81 184 199
Colombia - 60 - 57 - 117 - - - - - 11 - 11 - 128
Chile 31 101 13 11 44 112 60 81 - - 47 22 107 103 151 215
Mexico 71 66 2 4 73 70 39 57 - - 13 19 52 76 125 146
Panama 6 10 7 9 13 19 - - - - 4 4 4 4 17 23
Resto of LatAm 7 8 2 1 9 9 5 4 - - 8 4 13 8 22 17
Total LatAm 177 311 87 216 264 527 186 235 - - 124 101 310 336 574 863
Europe 24 15 8 35 32 50 161 170 80 111 3 14 244 295 276 345
Total 263 438 716 788 979 1,226 1,403 1,250 489 453 397 343 2,289 2,046 3,268 3,272
1. Income tax actually paid in the year that figures in the Cash Flow Statement in the Consolidated Annual Accounts. Does not include accrued amounts. The reconciliation between reported "income tax" and that which would result from applying the nominal tax rate in force in the parent company's home country (Spain) to "Profit before taxes" is detailed in Note 21 ("Tax situation") to the Consolidated Annual Accounts
2. Includes energy taxes in Spain amounting to Euros 306 million in 2018 (Euros 260 million in 2017), local taxes, employer social security contributions and other specific taxes in each country.
3. Includes basically employee withholdings and employee social security contributions.
Income by country
Euros million
Spain (3,297)
Argentina 41
Brazil 37
Chile 106
Mexico 104
Panama 13
Rest of LatAm (63)
Total LatAm 238
Europe 237
Total (2,822)
Received Grants

The movements of the received capital grants are breakdown in the Note 15 of Consolidated Annual Accounts. The received amount is Euros 1 million in 2018 (Euros 4 million in 2017). The amount of the received operating grants is detailed in the Note 24 of the Consolidated Annual Accounts and amounted Euros 1 million in 2018 (Euros 1 million in 2017).

Human Rights Policy

The company's commitment to respect for and protection of human rights is expressed in both the Corporate Responsibility Policy and the Code the Ethics. The Human Rights Policy, approved in 2011 by the Management Committee, defines and precisely establishes how the company believes it has to include these principles in its business management.

The Human Rights Policy acquires its full meaning in those locations where local legislation does not afford a suitable level of protection of human rights, and its compliance is horizontally integrated within the company and is the responsibility of each business area.

The policy establishes ten commitments, which were determined on the basis of the main risks that affect human rights in the company, and accepts the United Nations Guiding Principles on Business and Human Rights. It is also focused on the most important principles which have the greatest impact on the company’s business.

Human Rights Policy Principles

1. Avoiding any practices which are discriminatory, or which might compromise people's dignity.

2. Eradicating the use of child labour.

3. Helping to ensure freedom of association and collective negotiation.

4. Protecting people's health.

5. Offering dignified employment.

6. Commitment towards people linked to suppliers, contractors and collaborating companies.

7. Supporting and publicly promoting respect for human rights.

8. Respecting for indigenous communities and traditional ways of life.

9. Protecting facilities and people on the basis of respect for human rights.

10. Helping to fight corruption.

The company encourages the policy to be known and to be complied with using a communication and training plan, which includes a compulsory online course for all employees, seminars based around explaining principles of the policy and conflicts which could arise, and guidance sessions about the policy and its role in business activity.

Naturgy undertakes to engage the resources necessary to guarantee the effective implementation of this Human Rights Policy. In this regard, the company regularly analyses the human rights issues that are applicable to its activity and will introduce mechanisms that enable it to assess the risk of breach of these in the environments in which it operates.

During the initial stages of investment projects, and in the analyses of the social and environmental impact, the company will consider their impact on the protection and promotion of human rights and will define indicators in this regard. Similarly, the company will introduce specific measures for management of potential impacts and risks to human rights from the projects and investments and will ensure that sufficient resources are targeted at the implementation of the corrective measures identified.

In the due diligence processes prior to formalisation of collaboration agreements, also with governmental agencies, the company undertakes to assess the human rights policies and practices of its counterparts and to act in accordance with the principles laid out in the policy.

Any breaches, whether of the policy or any other aspect related to the respect of human rights will be studied in accordance with the internal procedures, legal regulations and the prevailing agreements, and could give rise to disciplinary or employment measures as determined in the internal regulations and legislation.

Employees of Naturgy are obliged to report any breach of the undertakings set out in this policy to the company, confidentially and without fear of reprisals. Those people who, without being company employees, witness potential malpractice in this area may also report this.

Related pages

1. Strategy 2. Business performance and results

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