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Yorkshire Water: taking sustainability into the mainstream

22 February 2021: Against a backdrop of tougher regulation, Yorkshire Water is blazing a trail when it comes to demonstrating sustainable business practices and social value. Rachel Willcox speaks to its CEO, Liz Barber ACA.

When you’re a utility providing essential water services to more than five million people and 100,000 businesses, sustainability is an issue you simply can’t afford to ignore. 

Liz Barber, CEO of Yorkshire Water and parent company Kelda Group, admits her personal sustainability mission coincides with growing corporate momentum on sustainability – not just at Yorkshire Water but across business generally. Fortunately Barber, the former chair of Accounting for Sustainability’s CFO Network, says the business benefits of sustainability make it an easy sell both internally and to broader stakeholders.

Barber had been Group Director of Finance and Regulation for eight years and took the top job in September 2019 at a time when the water sector was under pressure to rebuild trust, following an onslaught of criticism about shareholder dividends and executive pay against a backdrop of service failures.

The backlash prompted regulator Ofwat to take a harder line and in 2019 licenses were modified to include objectives for board leadership, transparency and governance including establishing a purpose, strategy and set of values. Water companies are now required to report on how principles are met through annual reporting, as part of wider reforms to rebuild trust and confidence in the water sector.

“We’ve got no one to blame but ourselves,” Barber admits. “As a sector, we lost our way in demonstrating that we’re here for public value and therefore we earn that licence – it’s not a gift – and you have to keep earning to keep it. Social purpose is critical to underpinning the monopoly licence we all have. There will always be a time lag between what we do and what people perceive but I do think in a post-COVID world it provides us with an opportunity to do and be seen to do the right thing for society as a whole.”

Turning sustainability rhetoric into reality 

As CFO, Barber’s focus had been on raising sustainable bonds and making headway on measuring sustainability, leading to the development of a decision-making framework to “optimise a capital programme around sustainable solutions.” Since assuming the CEO role, Barber says she’s been working closely with chairman Anthony Rabin and Dame Julia Unwin, the chairman of its social value committee, to turn the sustainability rhetoric and ambition into reality. “We have established our corporate purpose, which is to make Yorkshire a great place to be, now and always,” Barber explains. 

However, talk is cheap and Barber, a former EY partner, admits embedding sustainability into the organisation’s vision, behaviours and business plan is a big challenge. “That has to flow through to how we mobilise our resources, how we manage our business and report our KPIs.” Similarly choosing where to focus its resources in a way that best meets both corporate and sustainability objectives remains a work in progress. “The hard thing is saying no. We need to know we are fulfilling our purpose and not get overly distracted because there’s so much that could be done.”

Unlike some corporate responsibility committees doing good things around the edges, Barber says its social value committee has played a pivotal role in aligning strategic purpose with sustainability goals and helping to provide a filter for the huge range of potential sustainability projects it could pursue.

The answer is not necessarily to do lots of good things everywhere, Barber believes. “The best way to deliver our broader social purpose is in partnership with others. It’s a Joseph Rowntree Foundation concept of the anchor institution – we can deliver the best value by linking with partners to share resources and expertise to get the best outcomes.” 

It works with various partners including public bodies such as Hull City Council and the Environment Agency, as well as landowners – Yorkshire Water facilitates the Yorkshire Land Anchor Network, a group of around 50 landowners include the National Trust and the Crown Estate who between them cover more than a third of Yorkshire’s land area – to discuss how changes to land management can help address climate change. As devolution gathers pace, engagement with the local government on issues such as flood and environmental resilience is gathering pace.

Finance has a valuable role to play on the sustainability journey

The last few years have seen a growing appetite for sustainability across the financial markets, she says, and for good reason. “If you’re thinking sustainably, you’re looking to the long-term challenges and you’re resilient to them in advance. For investors, it means their returns are more reliable in the long run.”

Yorkshire Water set up its sustainable finance framework two years ago, “so any time we issue a bond it is by definition a sustainable bond.” The emergence of organisations that are only interested in financing sustainable organisations is a great opportunity and Barber would like it to be more mainstream. “It will be interesting to see how credit rating agencies factor this into their thinking,” she says.

In the meantime, Barber says finance has a valuable role to play in helping organisations on the sustainability journey. “It’s an exciting shift for the profession because accountants have always been the measure of the robustness and resilience of the organisation and the conscience of the board. It’s allowing them to expand their thinking and their influence.” 

However, she’s also conscious that many accountants are nervous about venturing from the relatively safe confines of financial capital towards measuring other less tangible forms of capital including human and societal. While section 172 of the Companies Act means companies already must report on wider non-financial measures at the front end of a set of accounts, the emergence of sustainability standards is both desired and inevitable, Barber believes.

“I would say don’t wait for a standard to emerge before you start to measure it because the gap will become too big. Start with the descriptions. There are standards around measuring carbon emissions, for example. Get to grips with them and be curious. Don’t be scared.” 

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