2018 Corporate Responsibility Report
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Naturgy has based itself on the Global Reporting Initiative (GRI) standards, more popularly known as the GRI Standards, in compiling this 2018 Corporate Responsibility Report.

The company believes that the report has been prepared in accordance with the comprehensive option of GRI Standards. The Materiality Disclosures methodology has been applied for yet another year. This methodology reviews the definition of material issues, their scope and the information on the commitment of the interested parties.

One new item, in 2018 and prior to approval of Law 11/2018 on non- financial reporting and diversity, was an analysis of materiality carried out in accordance with the recommendations of Royal Decree-Law 18/2017, aligned with the company’s commitments and corporate responsibility strategy and integrating the analysis of the degree of compliance with the Sustainable Development Goals in the countries where the company has a presence.

Furthermore, we have identified material issues at events and news through the KPMG Eye on Earth and Buzzsumo tools, which captures information from more than 300,000 different sources, including digital newspapers of 190 countries worldwide, websites of multinationals or governmental webs.

The material issues identified at the corporate level are those that:

Are of greatest relevance from the standpoint of corporate responsibility and reporting.

Can promote a more significant change in terms of economic, environmental and social impact.

Are considered most relevant to the stakeholders of the company.

List of material aspects at corporate level

Naturgy has identified eleven material issues of the utmost importance. It has also identified 15 other matters of interest.

 


# Issue identified Nature of the issue
Issues of utmost importance 1 Emissions and climate change. Environmental.
2 Occupational health and safety. Social.
3 Access to energy. Social.
4 Development of the communities and social action. Social.
5 Innovation and sustainable technology. Economic.
6 Customer care and satisfaction. Economic.
7 Biodiversity. Environmental.
8 Talent retention and attraction. Social.
9 Energy efficiency and consumption. Environmental.
10 Assessment of the supply chain. Economic.
11 Diversity and equal opportunities. Social.
Other issues of interest 12 Responsible purchasing. Economic.
13 Employability and employment. Social.
14 Health and safety of consumers and of society. Social.
15 Anti-Corruption. Economic.
16 Management of leaks, effluent and waste. Environmental.
17 Assessment of human rights. Social.
18 Water management. Environmental.
19 Competition practices. Economic.
20 Taxation. Economic.
21 Socio-economic and environmental compliance. Economic.
22 Political influence and lobbying. Economic.
23 Indirect economic impacts. Economic.
24 Materials used, recycled and reused. Environmental.
25 Freedom to join a union and management of relations with workers. Social.
26 Cybersecurity and information security. Economic.
NB: each country has a different prioritisation based on its corporate responsibility agenda.

Process for the identification of material matters

For the updating of material issues carried out in 2018, we have followed the 33 specific standards defined by GRI and they have been adapted to the company’s own characteristics.

Furthermore, for the prioritisation and definition of material issues we conducted interviews with different areas of the company and with external stakeholders, and have included other inputs, both internal and external.

For each of the eleven material issues identified, Naturgy has collected, identified and analysed the following information in its materiality study:

  • What is material:
    • Definition and description of the issue.
    • Material sub-issues.
    • Relevance for the business, for the sector, the impact it can have on the activities and regulation in this regard.
    • Relevant events for stakeholders related to the issue.
  • Formal reporting references:
    • GRI Standards indicators related to the issue.
    • Strategic lines of the Sustainability Plan that consider the matter.
  • Management approach –responding to the GRI Standards and to the ISO 19600 on compliance management:
    • How Naturgy manages the issue (policies, strategies, tools, initiatives and objectives).
    • Sustainable Development Goal (SDG) associated to the issue.
    • Stakeholder linked to the issue.

Sources and stakeholders consulted

In the identification and prioritisation of material issues, the following sources were taken into consideration:

  • Reference framework for the preparation of sustainability reports: 33 specific standards of the Global Reporting Initiative (GRI Standards) and GRI Sustainability Topic for Sectors report.
  • Sustainability Accounting Standards Board (SASB) Materiality Map.
  • Internal interviews: interviews with key areas of the company.
  • External interviews: interviews with external stakeholders.
  • Reputational analysis: reputational risks identified by the company.
  • Corporate Responsibility Policy: matters included in the policy.
  • Relevant issues identified and analysed.
  • Investors: material issues identified by RobecoSAM for the Dow Jones Sustainability Index (DJSI) and material issues identified by other analysts such as FTSE4Good, MSCI, Sustainalytics and Vigeo Eiris.
  • News and social networks: analysis of the main global events of interest for each issue that has taken place during the year.
  • Main risks: the Global Risks Report 2018 and Global Risks of Highest Concern for Doing Business of the World Economic Forum.
  • Benchmark: companies in the sector with high performance in corporate responsibility.
  • Integration of the Sustainable Development Goals.
  • Regulation: non-financial reporting and diversity bill.

Review of material issues by country where Naturgy is operational

Naturgy has identified the relevance of each material issue in each country in which it operates. These issues are identified according to the agenda of each country, taking into account the degree of achievement of the Sustainable Development Goals in these countries and establishing the key targets on which the company must focus through commitments at local level to help achieve these.

The company analysed the following countries: Australia, Algeria, Argentina, Belgium, Brazil, Chile, Costa Rica, Dominican Republic, Egypt, France, Germany, India, Ireland, Italy, Jamaica, Japan, Jordan, Luxembourg, Morocco, Mexico, the Netherlands, Oman, Panama, Pakistan, Peru, Portugal, Puerto Rico, Singapore, South Africa, Spain and UK.


Map of material issues

In order to respond to the GRI Standards, a map of material issues that identify what represents a material issue for Naturgy and where it is relevant is provided. As regards the latter criterion, Naturgy identifies the materiality of the issue from three standpoints:

  • Point of the value chain at which the issue is material.
  • Impact of the aspect inside and outside the company and, consequently, the stakeholder affected.
  • Geographic location. To determine the countries with material issues that make it necessary to crosscheck the following table with the activity map at the beginning of this report. In this way, and based on the governing philosophy of integrated and uniform management at Naturgy, the issue will be material in those countries that perform the activity of the value chain in which the issue is material.
# Material issues for Naturgy GRI Standard related to the material issue Nature Stages of the value chain where the material issues have greatest impact Impact of the aspect inside and/or outside the organisation by stakeholder 2018 Corporate Responsibility Report chapter that deals with the issue
        Generation Distribution Commercialisation Procurement Transportation Distribution Commercialisation    
1 Emissions and climate change 305: Emissions. EN     Society and administrations. Responsible management of the environment.
2 Occupational health and safety 403: Occupational health and safety.
EU25: Number of injuries and fatalities to the public involving company activities.
SO     Employees and suppliers. Health and safety.
3 Access to energy EU26: Percentage of population unserved in licensed distribution or service areas.
EU27: Number of residential disconnections for non-payment.
EU28: Power outage frequency.
EU29: Average power outage duration.
EU30: Average plant availability factor by energy source and by regulatory regime.
SO Customers, society, administrations and regulatory bodies. Commitment to society.
4 Development of the communities and social action 413: Local communities.
EU22: Number of people physically or economically displaced and compensation.
OG10: Number and description of significant disputes with local communities and indigenous people.
OG11: Number of sites that have been decommissioned and sites that are in the process of being decommissioned.
SO Society. Commitment to society.
5 Innovation and sustainable technology OG2: Total amount invested in renewable energy. EC Customers. Avant-garde and sustainable innovation / Service excellence.
6 Customer care and satisfaction 417: Marketing and labelling. EC       Customers. Service excellence.
7 Biodiversity 304: Biodiversity
EU13: Biodiversity of offset habitats.
OG4: Number and percentage of significant operating sites in which biodiversity risk has been assessed and monitored.
MA     Society. Responsible management of the environment.
8 Talent retention and attraction 102-7: Size of the organization (number of employees).
102-8: Information on employees and other workers.
404: Training and education.
SO Employees and suppliers. Interest in people.
9 Energy efficiency and energy consumption 302: Energy. EN Customers and society. Responsible management of the environment.
10 Assessment of the supply chain 102-9: Supply chain.
102-10: Significant changes to the organization and its supply chain.
308: Supplier environmental assessment.
404: Training and education.
414: Supplier social assessment.
EC Suppliers. Responsible supply chain.
11 Diversity and equal opportunities 401: Employment.
405: Diversity and equal opportunities.
406: Non-discrimination.
SO Employees and suppliers. Interest in people.

Scope of the information

This report contains the consolidated financial and non-financial data of Naturgy, referring to all the activities carried out during 2018 as a global gas and electricity operator, although they show peculiarities in some chapters.

As a consequence of the divestment process of the mining business in South Africa formalised in 2018, and described in Note 11 “Non-current assets and disposable groups of items held for sale and discontinued operations” of the consolidated annual accounts, the 2017 consolidated profit and loss statement and the trading figures for 2017 have been restated, for comparative purposes with the information concerning 2018, in application of IFRS 5.

In 2018, this information on discontinued activities refers to companies in Moldova, Kenya and South Africa. The companies in Kenya and South Africa were sold prior to the year-end, which has entailed an additional difficulty in obtaining non- financial information with regard to certain indicators. For the purpose of clarifying the scope used in the indicators and to provide the best transparency possible, in each chapter of the corporate responsibility report we will use a footnote to specify those indicators for which we have been unable to obtain data from some of these countries.

In the field of human resources, the information reported corresponds to the countries in which Naturgy is present and has incorporated companies with hired personnel assigned to them and where the company performs centralised management of its human resources policies, except for the number of employees and the percentage of men/women, which take into account all Group employees according to consolidation scope. The indicators that represent the evolution over the year, will include the information from the companies held for sale, provided that the opposite is not specified in a footnote, while the indicators that represent information at the year-end will not include information about these companies.

The information included in the environment section refers solely to those companies or activities in which the participation is equal to, or greater than, 50%, that have the capacity to influence environmental management and which have a significant capacity to impact environmental data, considering the global data.

With regard to compliance, the report shows the fines greater than Euros 60,000 imposed against the company in 2018 which were final judgements in channels of administrative review.

The complete list of companies making up Naturgy at 31 December 2018 appears in Annex I of the consolidated annual accounts, “Companies of Naturgy”.

Furthermore, the changes in the scope of consolidation are described in Annex II to the consolidated annual accounts.


Compliance with benchmark standards

The company prepares its report in accordance with the GRI Standards, and includes the applicable additional information required by the “Utilities” and “Oil and gas” supplements. The company believes that the report has been prepared in accordance with the comprehensive level of GRI Standards. This report has also been drawn up in accordance with the AA1000 AP (2018) Standard and the United Nations Guiding Principles Reporting Framework.

  • AA1000 AP (2018) Standard. The purpose of this standard is to provide organisations with a set of principles to situate and structure the way in which they understand, govern, administrate, implement, assess and surrender their accounts in sustainability performance.
  • Global Reporting Initiative.In accordance with the Global Reporting Initiative recommendations, the balanced and reasonable presentation of the organisation's performance requires application of certain principles to determine the content of public information on this issue and to guarantee its quality.
  • United Nations Guiding Principles Reporting Framework.The idea behind this framework is that the companies should report all information relating to human rights in line with the UN Guiding Principles on Business and Human Rights.

The consideration of the principles set out in the following table ensures that the information satisfies the guarantees required by the foregoing standards.

 

Application of the AA1000 AP (2018)
  • Inclusiveness. In relation to this principle, particular importance is placed on the information presented by Naturgy in the chapter of this report on actions that lead to dialogue with its stakeholders.
  • Relevance. The relevant matters for Naturgy are included in its Corporate Responsibility Policy that was approved in December 2015. This report is structured according to said matters. The contents of this report are also determined by the materiality study.
  • Capacity for response. It includes key performance indicators of the company, as well as its core policies and management systems in the spheres taken into account.
  • Impact. Organisations should monitor, measure and be accountable for how their actions affect their broader ecosystems.

 

Principles for drafting this report (GRI)
  • Stakeholder engagement. The Company has defined its stakeholders, identified its expectations and set actions to establish a two-way dialogue. This process is explained in the sections on dialogue with interest groups and corporate responsibility governance.
  • Sustainability context. The report offers a detailed analysis of the company's performance in the context of the social, environmental and economic requirements of its social and market environments. The sections on business model, strategy and sustainable opportunities focus specifically on this area.
  • Materiality. Those issues identified in the materiality study have been considered as material and have been included in the 2018 Corporate Responsibility Report.
  • Exhaustiveness. The outline of contents are defined with the help of those in charge of the key management areas of the company. This guarantees that essential aspects and impacts that each activity area of Naturgy has on its environment and on its own business targets have been taken into consideration.

 

Quality of the information given
  • Accuracy. All the information in the report is accurate and given in sufficient detail for the company's stakeholders to be able to value its performance in an appropriate manner.
  • Balance. The report clearly shows the positive and negative aspects of the organisation's performance, which enables a reasonable valuation thereof.
  • Clarity. The information is presented in a way that is understandable, accessible and useful. To enable its correct understanding, the use of technical terms is avoided. In addition, it uses graphs, diagrams, tables and indicators to describe the company's most relevant impacts and make it easier to read the document.
  • Comparativeness. The information given in this report makes it possible to analyse the evolution of the company's performance over time.
  • Reliability. The figures given in this report have been verified by EY. The drafting of the report took into account the four principles required by the AccountAbility AA1000 AP (2018) Standard, and whether or not the information given responds to the stakeholders' concerns and requirements.
  • Frequency. Naturgy publishes its Corporate Responsibility Reports annually, as soon as the information is available, so that the stakeholders have a good understanding of the company.

 

United Nations Guiding Principles Reporting Framework
  • Setting human rights reporting in the business context.
  • Meeting a minimum threshold of information.
  • Demonstrating ongoing improvement.
  • Focusing on respect for human rights.
  • Addressing the most severe impacts on human rights.
  • Providing balanced examples from relevant geographies.
  • Explaining any omission of important information.

Verification

The integrity, sound and truthful nature of the information given in this report are maintained by the policies and procedures included in Naturgy internal control systems and their purpose includes guaranteeing the correct presentation of the company's information to third parties.

In the said policies and in accordance with the Global Reporting Initiative recommendations, Naturgy conducts an annual external verification of the contents of its report.

This review is made by an independent expert, EY, which reviews the adaptation of the contents of the Corporate Responsibility Report to the provisions laid down in the Global Reporting Initiative Guidelines and the AA1000 AP (2018) Standard.

As a result of this process, an independent review report is drawn up to include the goals and scope of the review, as well as the verification procedures used and the corresponding conclusions, which can be consulted in the “Additional information” chapter of this report.


Queries and additional information

In addition to this Corporate Responsibility Report, in 2018 Naturgy is publishing the Integrated Annual Report, the Corporate Governance Report and the Audit and Control Committee Report, all pertaining to 2018.

Furthermore, special mention must be made of the fact that Naturgy publishes corporate responsibility reports in Argentina, Brazil, Chile, Mexico, and Panama.

Readers can send their doubts, queries or requests for information to the company's website, https://www.naturgy.com/inicio

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