Corporate Social Responsibility
The Group attaches importance to the pursuit of excellence as a
responsible corporate citizen in its operations throughout the
world and continues to develop its approach to Corporate Social
Responsibility (CSR). By far the greatest contribution the Group
makes in this area comes from the wealth created by maintaining
highly skilled jobs which arise from its business activities. The
Board believes that progress in this area will deliver competitive
advantage and will contribute to the Group’s long-term success. The
Group has well-developed policies on issues such as health, safety
and environment, supply chain, charitable donations, community
involvement, employment policy and employee learning and
development. Details of these policies are set out in the Report of
the directors. During the year an international CSR working group,
established by the Board, has reviewed the risks and opportunities
associated with CSR and has established a framework for structured
decision making in this area.
In 2003, the Group has developed and implemented a Supplier Code of
Conduct as part of its Supplier Advanced Business Requirements
system (SABRe). SABRe enables approved suppliers to understand the
key performance criteria required of them. The Supplier Code of
Conduct imposes the minimum standards required of the supply base
in terms of the integrity of their business relationships with the
Group. The Rolls-Royce Purchasing Code of Conduct has
also been implemented in tandem with the Supplier Code to ensure
that Group personnel operate and adhere to the same high standards
that are expected of the supply base.
Rolls-Royce Corporation has been actively involved in
ensuring that it meets US Government requirements to source from a
required quota of small and disadvantaged businesses.
Health, Safety and Environment (HS&E)
The HS&E committee, chaired by the Chief Executive, is
responsible for policy development and assurance; setting Group
objectives and targets; performance review; management system
review; and reporting. The Group is supported by the Environmental
Advisory Board (EAB), comprised of external members who are
respected authorities in their fields. The EAB reviews and makes
independent recommendations on the environmental and sustainability
aspects of the Group’s activities.
The corporate HS&E audit programme provides an independent
assessment of the level of implementation of the Group’s HS&E
management system. Several HS&E audits were completed in 2003,
including audits covering three UK-based businesses, operations in
Brazil and six sites in North America. HS&E reviews were also
undertaken at two joint ventures in Singapore. Good progress
continues to be made with the implementation of the Group-wide
standard for an integrated HS&E management system. During the
year training was provided on a range of HS&E issues up to
senior management level.
In 2004, the Group will publish its external environment report
‘Powering a better world’. This will include a report on progress
made in achieving the five-year environmental and safety targets
announced in 1998, as well as reporting on progress towards the
environmental improvement targets set for products by 2010. During
2003 the Group worked with Deloitte & Touche LLP with the aim
of providing independent assurance of data acquisition and
The Group operates three sites in the UK, which manufacture,
support and test nuclear reactor cores for Royal Navy submarines.
The Group continues to maintain a strong safety record on these
sites. HS&E issues are managed as an integral part of our
activities and an improving trend has been noted on all key
On the manufacturing site within this business, significant
investments have continued to be made by updating plant and
equipment and improving waste management practices. These
improvements have enabled the Periodic Safety Review of the site to
be concluded and signed off by the Nuclear Installations
Inspectorate (NII). In addition, the NII has accepted the Group’s
findings that there is no reasonably foreseeable off-site
The nuclear operations continue to make good progress in reducing
the volumes of waste disposed. The Group has actively supported the
Environment Agency in updating the discharge authorisations for the
two licensed sites in Derby and this process was approaching
completion at the end of 2003. No application has been made to
increase any of the existing discharge limits and proposals have
been made to decrease most limits. The Group has volunteered the
closure of its landfill site at Crich near Derby, which had been
used for the disposal of low-level radioactive waste. Throughout
this process, the Group has actively sought to keep the local
community informed about decisions and progress by means of public
meetings, newsletters and discussions with community
Health and safety management
The Group experienced no work related fatalities during 2003 and
lost-time injuries compared favourably with the engineering sector
averages. The increasing application of a structured
risk-management approach to safety should enable further
improvements in performance to be made.
The independent safety review programme for 2003, undertaken by
external safety consultants, covered machinery safety and
contractor selection and control. Other initiatives include
measures to improve the statutory inspection of equipment.
Regrettably an accident occurred in April 2003 at a UK site of the
Group’s Marine business. An employee sustained a fractured pelvis,
when a fabrication on which he was working, fell over. A fine of
£10,000 was subsequently imposed for failure to implement
appropriate controls. This incident has been the subject of a
detailed review by the Group’s Major Incident Board and the lessons
learnt have been communicated to all businesses.
The Group is certified to the international environmental
management systems standard ISO 14001. It is the Group’s aim that
any newly acquired business should achieve certification within two
years of acquisition. Implementation programmes are in place and
during 2003 certification was awarded to several additional sites
in the UK, USA, Norway and Poland.
A Group company was prosecuted in June 2003 following the release
of a small quantity of heating oil in the previous year. A failure
of a fuel filter on a warehouse space heating appliance on a UK
site led to the oil entering a neighbouring stream via surface
water drains. The Court imposed a fine of £10,000. The Group’s
Major Incident Board has reviewed this incident, with the lessons
learnt being communicated to all businesses. A further UK site,
which produces ceramic components, has been the subject of an
abatement notice issued by Amber Valley Borough District Council in
relation to alleged odour emitted from kilns. Significant effort
has been applied to resolve this situation, including the
appointment of specialist environmental consultants.
In 2002 the Group was placed first in its business sector amongst
those companies completing the Business in the Environment (BiE)
index of corporate environmental management and 39th out of a total
of 192 participants.
The Group has continued to make excellent progress towards meeting
targets set in 1998 for the improved environmental performance of
its products. The Group attaches importance to developing products
with lower emissions. It is also involved in a number of
industry-wide initiatives aimed at reducing the environmental
impact of Rolls-Royce products while continuing to
provide safe, efficient and affordable power for customers.
The Group continues to participate in the UK carbon dioxide
emissions trading scheme. Under this initiative, the Group accepted
targets for the reduction of carbon dioxide emissions from its
operations in the UK. In December 2003 the Group also joined the
Chicago Climate Exchange (CCX). CCX is a recently formed exchange,
which aims to administer the world’s first multinational and
multisector market place for reducing and trading greenhouse gas
emissions. Setting and meeting challenging energy reduction targets
will support the Group’s involvement in this initiative.
The Group continues to provide a preventative Occupational Health
service to its employees with a concentration on rehabilitation,
education, health promotion and monitoring. The Group’s Chief
Medical Officer is responsible for setting a consistent standard of
Health promotion campaigns were delivered at major locations
worldwide during 2003 and included a Posture Awareness week, an
International Heart week and an Occupational Disease awareness
campaign. The comprehensive approach taken to managing workplace
pressure was included as an example of best practice in the
‘Beacons of Excellence’ publication on stress management, a report
commissioned by the UK Health and Safety Executive.
The Group sets stringent occupational health related objectives and
targets for reducing occupational disease and work related ill
health. An absence management policy, supported by a mainframe
software application, is promoting early intervention and active
rehabilitation in the prevention of long-term disability.
The number of Group employees at the end of the year was 35,214
The Group’s employment policies and practices support overall
business objectives by motivating and developing employees to meet
the requirements of the business and its customers. Policies
continue to be reviewed and developed to support the changing needs
and international nature of the business.
A strong emphasis is placed on effective worldwide employee
communications and each business has its own programme of
communication adapted to its particular needs.
The Group consults with employees and employee representatives on a
wide range of topics relating to its overall business objectives.
Regular meetings are held in each business to discuss opportunities
and issues of common interest.
In recent years, senior employee representatives have worked
closely with management to improve the quality of consultation and
communication, resulting in a jointly agreed framework. A Company
and Union Forum is now held at least twice a year involving senior
management and employee representatives from across the Group
followed by supporting communication in each business. This process
is currently being broadened and a Special Negotiating Body has
been established to develop and introduce a Global Council that
will cover all employees in the Group worldwide.
During 2003 the Group consulted broadly over proposed changes to
the Rolls-Royce Pension Fund for employees in the UK.
Through this process new arrangements, which began on January 1,
2004, were agreed with the employee representatives and accepted by
employees. These arrangements strike a balance between increased
employer contributions and changes to benefits that will help to
sustain a secure, affordable and competitive defined benefit scheme
The Group has announced plans to invest in new and modern
facilities in Derby, Hucknall and Bristol and are consulting with
employee representatives over the new working practices required to
support the business case for investment. A new facility at
Inchinnan in Scotland opens in 2004.
The Group has developed a network of Resource Centres to support
the redeployment and training of employees affected by
restructuring and redundancy. In partnership with employee
representatives and external bodies, the Group has also helped
develop a model to retain key skills within the engineering
The Group continues to build on the Investors in People award
gained in 2002 for all businesses in the UK. The Group is
progressively implementing the benefits and principles of this
standard through all of its businesses worldwide.
The Group has long had an equal opportunities policy and recognises
the importance of developing a diverse and inclusive workforce. It
continues to support initiatives to attract more women and people
from ethnic minorities to pursue careers in engineering. In 2003 it
committed to working with other major engineering companies to
increase the number of women with engineering, science and
technology qualifications developing their careers in R&D based
The Group’s policy is to provide, wherever possible, employment,
training and development opportunities for disabled people. It is
also committed to supporting employees who become disabled and to
helping disabled employees make the best possible use of their
skills and potential.
The Group is committed to encouraging employee share ownership. All
employees are regularly invited to participate in share save plans
and have committed to save over £100 million to buy shares in the
Company. In addition UK employees can receive part of their annual
bonus in Company shares and can make monthly share purchases from
their gross salary, in accordance with statutory arrangements.
Learning and development
The Group continues to invest in improving individual and business
capability by offering development opportunities and training
programmes for employees, customers, suppliers and the communities
in which it operates. The Group has a strong tradition of
succession planning driven by development cells in all businesses
and functions, with leadership development programmes designed to
support career progression.
The Group has continued to apply, on a global basis, the
Rolls-Royce Learning System which sets frameworks for
leadership, continuing professional development and business
management development. Working with academic partners around the
world, the Group has a broad range of programmes that cover
managerial, professional, technical and operating skills.
In 2003, the Group spent £28.6 million on the education and
training of employees and recruited 130 graduates and 100 modern
apprentices and technicians. In addition there were 235
undergraduate students in the Group for training periods of between
two and 12 months. At the end of 2003 there were 260 graduates on
formal training programmes and 350 apprentices and technicians
Working on local community projects forms a key part of development
programmes for trainees and managers. These community projects
involve working with external partners in education, the arts, the
environment and regeneration.
As a way of investing in local communities, the Group offers free
places to local partners on internal training programmes. The Group
has actively pursued a policy of sharing learning facilities, and
in Derby has attracted 4,800 enrolments from community learners. In
Indianapolis, the Group supports the Wayne Township Helping One
Student to Succeed (HOSTS) programme. Volunteers from the site help
students with reading, maths and comprehension skills.Other sites
offer similar help to local schools.
During 2003 the Group has been recognised by the UK Government as a
Centre of Vocational Excellence (CoVE) for Lean Manufacturing, in
partnership with Derby College and Amicus. Working with the Sector
Skills Council (SEMTA), ten training places have been offered for
people to take up apprenticeships for employment in the wider
The Group continues to work closely with schools, colleges and
universities to promote science and technology. Its policy is to
work with government, local and national institutions and education
establishments to widen students’ experience of industry and
promote careers in the aerospace, energy and marine sectors. In
partnership with a developer of business simulations, the Group has
successfully piloted a programme to stimulate enterprise education
in schools. This programme, ‘Profitable Pursuit’, will roll out
The Group supports a wide range of education projects and
initiatives including Open Industry, Specialist Colleges, Education
Action Zones, Arkwright Scholarships and Science and Engineering
Ambassadors (SEAS). It continues to be active in supporting
international education and sponsoring international students.
Through the UK Government’s Chevening scheme, the Group currently
supports students from China, Indonesia, Korea, Vietnam and
The Group’s profile as an Employer of Choice for graduates is
demonstrated by its success in national surveys in the UK and
In 2003, the Group was awarded an international distinction for
Innovation and Excellence in Corporate Education by the Corporate
University Xchange, a North American benchmarking group.
Charitable donations are an integral part of the Group’s
involvement in the community. In 2003, the Group’s total charitable
donations amounted to £1.1 million. The Group community investment
committee (Group CIC) was established in 2003 to oversee the
implementation and operation of a new, Group-wide policy on
charitable donations. The Group CIC is supported by a series of
national committees which operate within the policy established by
the Group CIC.
The policy the Group CIC follows when considering charitable
appeals is set out below:
‘As a forward-looking, innovative and global company,
Rolls-Royce Group plc is committed to being a good
corporate citizen in its operations throughout the world. The
Company’s policy on donations is to direct its support primarily to
causes with educational, engineering and scientific objectives, as
well as to social objectives connected with the Company’s business
and place in the wider community.’
During 2003, charitable donations in the UK amounted to £397,000.
This included continuing support for the Derbyshire and Greater
Bristol Community Foundations; SSAFA Forces Help – Appeal for the
Gulf; Open Industry and the Institute of Physics.
Elsewhere, the Group has made charitable donations amounting to
£661,000 in those countries in which it has a significant presence.
In North America, this included support for the work of United Way,
Habitat for Humanity and Embry-Riddle Aeronautical University. In
Germany the Group supported the Federal President’s Annual Summer
Festival and in the Nordic countries it supported a number of local
sports and arts-based projects.
A list of the principal donations made in 2003 is available on
written request to the Company Secretary.
In addition to our charitable donations, contributions of around
£565,000 were made to projects through the Group’s corporate
sponsorship committee and through educational programmes.
The Group has a long and successful history of community
involvement. As part of its commitment to being a good corporate
citizen, it assists the communities in which its businesses operate
and its employees live and work. Employees are also encouraged to
play their own role in the community. This community involvement is
designed to support the Group’s values of reliability, integrity
and innovation and is directed towards supporting education, the
environment, the arts and economic and social regeneration.
The Group is publishing its first Community Report in 2004. This
will illustrate the range of support given to community based
organisations and projects.
Examples of activities include:
– sponsoring ViVA, an orchestra resident in Derby, through which
the Group supports concert giving and music education programmes in
– establishing a UK-wide partnership with The Prince’s Trust to
support its team and business start-up programmes;
– developing an environmental education project with The National
– supporting project Compass, working with homeless ex-service men
– Indianapolis-based employees supporting Habitat for Humanity by
helping to construct a home for a local family;
– working with The Design Museum on a range of interactive
workshops for young people; and
– supporting the Royal Aeronautical Society’s centenary events.
The Group also finances the administration of the Payroll Giving
Scheme for UK employees. In 2003, the scheme helped employees to
make donations of over £321,000 to over 200 charities of their
choice. The high level of UK employee participation, in excess of
20 per cent, was identified as best practice in the UK Chancellor
of the Exchequer’s Giving Campaign.
As part of community investment activities, employees are
encouraged to take up opportunities for development within local
community based projects. Examples of this include:
– education business partnerships running successful mentoring
programmes for school pupils;
– participating in the UK’s Science and Engineering Ambassadors
– providing support to employees who are school governors;
– working with organisations such as The Prince’s Trust and Young
Enterprise to provide business mentors and advisers.
The Group is able to offer support in-kind to local initiatives.
This may include the provision of places on in-house training
programmes; the donation of surplus computer equipment and
furniture; and offering the free use of meeting rooms and
The Group is a member of Business in the Community and actively
supports Common Purpose programmes across the UK. These two
organisations aim to promote greater business awareness and
involvement in wider community issues and encourage greater