Independent Assurance Statement

Scope and objectives

RWE npower commissioned Two Tomorrows (Europe) Limited to undertake independent assurance of its 2011 Corporate Responsibility (CR) Report (the ‘Report’) as published at www.rwenpowercr.com.

The assurance process was conducted in accordance with AA1000AS (2008). We were engaged to provide Type 2 moderate level assurance, for the following areas:

• evaluation of adherence to the AA1000APS (2008) principles of inclusivity, materiality and responsiveness (the Principles); and
• reliability of specified sustainability performance information, as listed under RWE npower’s Key Performance Indicators (KPIs) section (available at: link).

We used the Global Reporting Initiative (GRI) Quality of Information Principles as Criteria for evaluating performance information.

Responsibilities of the directors of RWE npower and of the assurance providers

The directors of RWE npower have sole responsibility for the preparation of the Report. In performing our assurance work, our responsibility is to the management of RWE npower, however our statement represents our independent opinion and is intended to inform all of RWE npower’s stakeholders including its management. We were not involved in the preparation of any part of the Report. In addition to this contract, we have provided verification of RWE npower’s submission to the Green Energy Supply Certification Scheme and reviewed RWE npower’s environmental data reported to RWE AG for use in the RWE AG CR Report. This is the sixth year that we have provided assurance for RWE npower. We adopt a balanced approach towards all RWE npower stakeholders.

Our team is comprised of Jon Woodhead, Dave Knight, Elvin Ozensoy, Kate Martin, and Samantha Parsons. Further information, including individual competencies relating to the team, can be found at: www.twotomorrows.com

Basis of our opinion

Our work was designed to gather evidence with the objective of providing moderate assurance as defined in AA1000AS (2008). We undertook the following activities:

• Review of the current sustainability issues that could affect RWE npower and are of interest to stakeholders;
• Interviews with selected directors and senior managers responsible for management of sustainability issues and review of selected evidence to support issues discussed;
• Review of information provided to us by RWE npower on its reporting and management processes relating to the Principles;
• Site visit to Didcot B, to review source data and implementation of strategy at this site;
• Review of supporting evidence for key claims in the Report. Our checking processes were prioritised according to materiality and we based our prioritisation on the materiality of issues at a consolidated corporate level; and
• Review of the processes for gathering and consolidating KPIs using the GRI Quality of Information Principles and, for a sample, checking the data consolidation. Where data had been checked by another third party or submitted to regulatory authorities, we tested transposition from these sources to the Report. This included: financial information audited by RWE npower’s financial auditors, data already submitted to regulatory audit such as EU ETS and community investment data assured by the London Benchmarking Group and social spend data which was submitted and used by Ofgem.

Our work did not cover any claims related to RWE AG at Group level.

Our conclusions

We reviewed and provided feedback on drafts of the Report and where necessary changes were made. On the basis of the work undertaken, nothing came to our attention to suggest that the Report does not properly describe RWE npower’s adherence to the Principles or its performance.

Observations

Without affecting our assurance opinion we also provide the following observations.

During 2011, RWE npower developed a new company-wide strategy which considered the integration of sustainability into the management of the business.  Future Reports should include more specific details of work to embed the strategy into business practice over the course of 2012, and the outcomes from action plans that are being developed to implement the new strategy in a meaningful way.

Inclusivity concerns the participation of stakeholders in developing and achieving an accountable and strategic response to sustainability

• We have previously recommended that RWE npower Reports should explain how groups such as the Customer Stakeholder Council and CR Committee have influenced decision making.  Whilst our assurance process has confirmed that these mechanisms are performing an important function within the company, future Reports should provide additional details on how the company’s approach to specific issues has been informed by these groups.
• This year’s Report demonstrates a positive improvement in RWE npower’s response to customer communication and transparency issues, based on feedback from stakeholders including Ofgem. For example, the Report includes information on how the company’s new customer platform is beginning to facilitate improvements in customer service performance. 

Material issues are those which are necessary for stakeholders to make informed judgments concerning RWE npower and its impacts

• The Report includes references to RWE npower’s carbon intensity target for 2015, and a short term target for 2012 that has already been exceeded by 2011 performance.  The next Report should provide a statement describing how projected changes in the generation portfolio and demand patterns will impact on future carbon targets. We also recommend that RWE npower should include background information on current and expected changes in electricity generated by the different types of generation in the company’s portfolio, and how these impact emissions intensity performance.
• The Report does not include detailed information on the impacts of RWE npower Renewables.  Future Reports should provide additional information on material issues managed by RWE npower Renewables, such as: biodiversity impacts, and contribution to carbon emissions reduction performance and plans.
• In our statement for last year’s Report, we recommended further reporting of the implications of large scale biomass generation in future Reports.  This year’s Report does include information on developments at Tilbury, and actions to ensure the sustainability of the wood pellet supply chain.  We recommend that future Reports should include information on the ongoing discussions with relevant stakeholder groups on this issue.
• Over the last year RWE npower have identified ‘carbon hotspots’ in their services supply chain and have benchmarked the level of disclosure relating to these impacts across a range of other utility sector companies. Although we understand RWE AG manages fuel procurement across the Group, including RWE npower, and already partially discloses carbon emissions for fuel supply chain, we recommend that RWE npower should review the opportunities to report on emissions from its own fuel supply chain to demonstrate a leadership position in accounting for carbon emissions.
• In our statement for last year’s Report, we observed that whilst the process of electricity market reform is not concluded, we suggested that there was a need to set out RWE npower’s vision for how investment will reduce carbon emissions over the longer term.  Some elements of this vision are included in this Report, and further details should be provided in next year’s Report following the implementation of the legislation.

Responsiveness concerns the extent to which an organisation responds to stakeholder issues

• Our review confirmed that the CR Committee held discussions around employee diversity and that the company responded by developing a Gender Diversity Plan and working towards RWE Executive Gender Targets.  We recommend that RWE npower should extend the focus of this work beyond gender to consider other aspects of diversity.  We note that there will be a review of the way diversity and inclusion is reported internally, to provide more meaningful data on a regular basis and facilitate more rapid changes to strategy to address negative trends.

• RWE npower has undertaken significant work during the year to improve its communications regarding pricing and its relationships with customers. The company also reports that it has made good progress in increasing the uptake of its energy efficiency services and raising awareness to domestic customers about energy demand management.  We recommend that next year’s Report should include analysis of the impact of this work on customer perceptions of the company, and on the usage of energy by customers.
• The employee survey that was carried out during 2011 identified a number of areas for improvement, in particular relating to organisational change.  Next year’s Report should provide information on the measures taken to address these areas of concern.

Performance information

• The presentation of KPIs, targets and plans in the Report enables long term trends to be more clearly seen and clarifies the links between historical trends, recent performance and how they map onto future targets and expectations. We recommend that the suite of KPIs should be reviewed and improved over the coming year, to achieve a better representation of the key impacts of the company, aligned with materiality and targets.
• In our statement for last year’s Report, we recommended that emissions data, both by KWh generated and absolute numbers, should be reported against a trajectory and timeframe linked to national and international targets, to illustrate how RWE npower’s performance is contributing towards achievement of these targets.  We restate this recommendation.
• As users of high volumes of water, we recommend that RWE npower should provide additional performance data and information on the implications of water use at the company’s generation sites, in the context of local availability.
• We note that the number of environment related complaints represent the number of ‘events’ associated with any number of complaints. The numbers of actual complaints received associated with these events is not reported.  Our assurance confirmed that there is a need to ensure greater consistency on definitions used to classify complaints received as ‘justified’, as part of ongoing improvements to data protocols and definitions provided to power stations.

Two Tomorrows (Europe) Limited
London
3 May 2012

Two Tomorrows (Europe) Limited trading as Two Tomorrows is an international corporate sustainability agency. We deliver deep insight, strategic advice and pragmatic support to major companies, enabling them to create long-term value by doing business sustainably. www.twotomorrows.com