yes, but at its heart these values encourage colleagues to ask ‘Did you do the right thing?’ The right thing from the point of view of our business, the environment and our customers.’ Now that Anglian Water has defined its purpose
and values, it is holding workshops with front line managers and business leaders to show them how to ensure their people and teams incorporate these. This work is taking place against the backdrop of
the industry’s five-year regulatory settlement, when each water company submits a business plan framed against a five-year and 25-year vision. The plan includes each water company’s initial assessment of what its strategy is likely to cost and, as a result, what customer bills should be. Last December, however, these plans were rejected
by industry regulator Ofwat, which ruled instead that water companies across England and Wales must cut customer bills by 12 per cent by 2025, saving the average household around £50 per annum. Anglian Water has plans to invest £6.46 billion over the next five years; Ofwat’s intervention will result in a shortfall of almost £750 million. But water companies are fighting back, arguing that Ofwat’s price determination will force them to
WHAT THE BOARD MUST CONSIDER
The enhanced Articles of Association require that Anglian Water must conduct its business and operations for the benefit of shareholders while delivering long-term value for its customers, the region and communities it serves and seeking positive outcomes for the environment and society.
Every decision taken by the board must now consider:
• The impact of Anglian Water’s operations on communities and the environment
* The interests of its employees
* The need to foster good relationships with customers and suppliers
• The need to maintain our reputation for high standards of business conduct
* The consequences of decisions in the long-run
Its new Articles of Association requires the board to: - Adopt a statement of responsible business principles
- Invite a reputable independent body to scrutinise its policies and performance against these principles
- Demonstrate in its Annual Integrated Report how it has run the company in accordance with its purpose and responsible business principles
CorpComms | February/March 2020
concentrate on short-term performance at the expense of long-term capital investment. Many companies, including Anglian Water, have referred Ofwat’s decisions to the Competition and Markets Authority. ‘Keeping bills low will lead to sub- optimal decision making,’ says Nelson. ‘The regulatory cycle is a crunchy time for us. There will be difficult decisions to make over the next six months. It is easy to stay true to values when times are good but harder when times get tough. We have unpicked our values now so that we can use them when making these decisions. We are staying true to our purpose, and are emboldened to challenge a decision that does not allow us to live up to it.’
We have a framework to make difficult decisions
It is the first time that water companies have argued
that there is a balance to be struck between low bills and the need to invest for the long-term, and that Ofwat’s assessments are incorrect. Nelson believes that the disconnect is in part due to timing. The price review process was embedded in the 2017/18 public policy agenda when the focus was on saving money and looking after customers. ‘The narrative has changed since then,’ he argues. ‘A climate change emergency has been declared. Local authorities around the country understand the science and the need to invest now. We had a clear narrative from government to invest in a sustainable and resilient structure, particularly outside London. We think this new piece of the puzzle has not been considered.’ Anglian Water’s customers use 1.2 billion litres of
water every single day – the equivalent of a small lake – and the business has to create and run a complex network that can handle peaks and troughs, is resilient to drought and floods and also deal with climate change. ‘Our business plan is right for our region,’ adds Nelson. ‘More than half a million customers took part in stakeholder exercises and co-created our business plan. They are the bill payers of the future. If Ofwat drives through its commercial rationale, it will lead to sub optimal short-term decisions which are not aligned with our purpose [and ultimately customers’ interests].’ The company’s recent changes to its Articles of
Association means that this is not viable. ‘Purpose is not a pretty veneer here. It is locked in and embedded into the way this business is run. It is a powerful tool,’ says Nelson. ‘This is a test case for the value of purpose in business, and we are pleased to be involved in that.’ CC
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