Corporate Social ResponsibilityThe Group continues to attach importance to the pursuit of excellence as a responsible corporate citizen in its operations throughout the world and 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 CSR 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 this section. During the year, the Group’s strengthened performance in CSR was recognised by the Group’s ranking in 10th position in the 2003 UK’s Business in the Community Corporate Responsibility Index and by its continued inclusion in the Dow Jones Sustainability Index.
Supply chainThrough its supplier quality system ‘Supplier Advanced Business Relationships’ (SABRe), Rolls-Royce makes its approved suppliers aware of the performance standards expected of them. SABRe includes a Supplier Code of Conduct which was amended in 2004 to refer more explicitly to Health, Safety and Environment issues. The Code is being communicated to suppliers through a series of environmental conferences and an external newsletter. Group CSR issues affecting suppliers are evaluated on a regular basis, as is the performance of individual suppliers. In addition, supplier evaluations are also taking place on a prioritised basis. The Supplier Code of Conduct is supported by an equivalent internal Rolls-Royce Purchasing Code of Conduct to ensure consistency of approach.
An annual review takes place to ensure that Rolls-Royce Corporation in the USA continues to meet US Government requirements to source from the 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), the membership of which includes 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 Major Incident Board, chaired by the Chief Operating Officer, reviews incidents to make sure that the lessons learnt are effectively communicated throughout the Group. Incidents considered during the year related to a diesel spill at the Bristol site, a fire at the Indianapolis plant and an engine handling incident at the civil aerospace test facility in Derby.
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 2004, covering operations in the UK, Germany, Norway, South Korea and North America. Good progress continues to be made with the implementation of the Group-wide standard for an integrated HS&E management system. HS&E reviews were also undertaken at joint venture operations in South East Asia and at selected suppliers in China.
During 2004, the environment report ‘Powering a better world’ confirmed the successful achievement of the challenging five year targets, set in 1998, covering key performance indicators for HS&E. Following on from this, new three year targets have been set covering energy use, solid waste, solid waste recycling, hazardous liquid waste and lost time injury rate. Programmes are also in place aimed at producing a significant change in performance in these areas. The Group is continuing to work with Deloitte and Touche LLP, who provided external assurance of the 2003 environment report. An update, containing data for 2004 and progress against the targets, will be published on the Rolls-Royce website during 2005.
The Group operates three sites in the UK, which manufacture, test and support nuclear reactor cores for Royal Navy submarines. The Group continues to maintain a strong health, safety and environmental record at these sites.
Health and safety managementThe Group experienced no work related fatalities during 2004. Efforts continue to improve our performance on health and safety, with a particular focus on noise induced hearing loss and manual handling.
EnvironmentBusinesses in the Group are 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.
During the year, the Group was placed first in its business sector amongst those companies completing the 2003 Business in the Environment (BiE) index of corporate environmental management and 32nd out of a total of 177 participants.
The Group continues to participate in the UK carbon dioxide emissions trading scheme and the Chicago Climate Exchange (CCX). Under these initiatives, the Group has accepted targets for the reduction of carbon dioxide emissions from its operations in the UK and North America. Setting and meeting challenging energy reduction targets will support the Group’s involvement in this initiative. During 2004, the Group exceeded its obligations to reduce its emissions under the UK emissions trading scheme and was able to sell some emissions units, further enhancing the cost saving benefits of energy reduction.
In our latest Environment Report, published in 2004, the Group presented information relating to steps being taken on reducing the overall environmental impact of its manufacturing operations worldwide. Our performance against targets between 1998-2003 is shown in the following table:
|Reduce annual energy consumption by the end|
of 2003 relative to 1998 levels
|Reduce greenhouse gas emissions by the end|
of 2003 relative to 1998
|Reduce the use of solvents per year up to end|
|10% pa||32% pa|
|Implement strategies to phase out the use of|
asbestos, cadmium, hexavalent chromium
|Reduce water consumption by 2003 relative to 1998||10%||33%|
|Reduce the production of solid waste by the end|
of 2003 relative to 1998
|Increase the proportion of waste sent for recycling|
or recovery by the end of 2003
The Group has continued to make excellent progress in improving the environmental performance of its products. This has been made possible by sustained investment in technology development. Over £3 billion has been invested in research and development during the last five years, mainly to create new products with increased efficiency and reduced emissions. During 2004, Rolls-Royce was selected as one of thetwo engine suppliers for the Boeing 787 Dreamliner. The Trent 1000 engine, being developed for this aircraft, will have outstanding environmental performance, in line with or exceeding long-term published targets. The Group continues to be involved in a number of industry-wide initiatives at national and international level aimed at improving the environmental performance of power systems.
Occupational HealthThe Group provides a preventative Occupational Health service to its employees which focuses on how individuals’ health can affect their work and how their work can affect their health.
Occupational Health continues to concentrate on four main areas of rehabilitation, education, health promotion and monitoring. The Group’s objective is to provide a ‘modern, forward looking Occupational Health service recognised for delivering best practice’. The priority in rehabilitation is for early intervention and active management of cases. A new training course for managers, entitled CARE, has been developed to assist managers in coping with absence and rehabilitation effectively. Health promotion campaigns delivered at major locations worldwide during 2004 included prostate cancer awareness, a travel health week and a low back pain awareness week. The Group sets stringent occupational health related objectives and targets for reducing occupational disease and work related ill health. A campaign to reduce noise induced hearing loss was launched in 2004.
The Group’s approach to managing workplace pressure continues to evolve and is recognised as an example of best practice by the Health and Safety Commission and in other external publications. Dr Ian Lawson, the Group’s Chief Medical Officer, has recently been appointed President of the Society of Occupational Medicine.
The number of Group employees at the end of the year was 35,372
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.
In 2004, senior management representatives and a special negotiating body of employee representatives agreed to broaden this process through the introduction of a Global Council in 2005 covering all employees in the Group.
The Group is investing in new manufacturing facilities in Derby, Hucknall and Bristol in addition to further investment in the plant at Barnoldswick. A new facility at Inchinnan in Scotland officially opened during 2004. Following consultation with employee representatives, agreement was reached on the introduction of Modern Working Practices at all these locations. Plans have also been announced to invest in a new facility at East Kilbride and to invest in the existing plant at Indianapolis. Discussions are currently in progress with employee representatives at both locations on the new working practices required to support the business cases for investment.
The Group has further developed its capability to support the redeployment, training and career management of employees through a network of Resource Centres.
The Group has also helped to redeploy employees affected by restructuring and redundancy across the Midlands through the involvement of more than 30 organisations in a new partnership approach. In 2004 the Company was reaccredited under the Investor in People Standard.
The Group has a strong 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. A new global policy and framework for Diversity and Equality was developed and introduced in 2004 in consultation with employee representatives.
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 Sharesave 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 people within
the communities in which it operates.
The Group has a strong tradition of succession planning driven by development cells in all businesses and functions. During 2004, the leadership programmes which support career progression have been redesigned to reflect the evolving needs of the business.
In 2004 the Group implemented the Rolls-Royce Development System to standardise across its worldwide operations the processes for performance management, succession management, and individual and organisational development.
The Group has continued to develop the Rolls-Royce Learning System which sets frameworks for leadership, continuing professional development and business and operations management. Working with academic partners across the world, the Group has a broad range of programmes that cover managerial, professional, technical and operating skills. Leadership and technical programmes have been designed to support the businesses in improving their processes as part of the Group’s drive for Process Excellence.
In 2004, the Group spent £30 million on the education and training of employees and recruited 170 graduates and 109 apprentices and technicians.
In addition, there were 364 undergraduate students in the Group for training periods of between two and 12 months. At the end of 2004, there were 288 graduates on formal training programmes and 330 apprentices and technicians worldwide.
Working on local community projects forms a key part of development programmes for trainees and managers. These projects involve working with external partners in education, the arts, the environment and regeneration. Support for local communities also includes free places on internal programmes and support for local schools.
The Group continues to work closely with schools, colleges and universities to promote science, technology and enterprise. 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, marine and energy sectors. In 2004, the Group launched the Rolls-Royce Science Prize to promote and reward teamwork in science teaching in schools and colleges in the UK and Republic of Ireland. It also piloted Profitable Pursuit, a business simulation to stimulate enterprise education in schools.
The Group supports a wide range of education projects and initiatives including Open Industry, Specialist Schools, Education Action Zones, Science and Engineering Ambassadors, ‘Pack to school’ for underprivileged children and Building the Innovation Generation to promote engineering education in schools.
The Group’s profile as an employer of choice for graduates has further strengthened in the UK, as evidenced by the results of a recent leading national survey.
The Group has continued to support our supply chain and our customers with development programmes. In the supply chain, this has included training in people development and business improvement techniques. We have supported our customers and related government departments with management and business education. For example, the Group led an initiative to establish the British University of Dubai which was opened in 2004. Through the UK government's Chevening scheme, the Group also sponsored students from Brazil, China, India, Indonesia, Malaysia and Taiwan.
Community investmentCharitable donations are an integral part of the Group’s involvement in the community. In 2004, the Group’s total charitable donations amounted to £969,000. The Group community investment committee was established in 2003 to oversee the implementation and operation of the Group’s policy on charitable donations. Following a review of its status in 2005, it was decided that in future it should operate as an executive committee reporting to the Board.
The committee is supported by a series of national committees and operates within the following policy:
‘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 Group’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 Group’s business and place in the wider community.’
During 2004, charitable donations in the UK amounted to £501,000. They included continuing support for Greater Bristol Community Foundation, Open Industry and the Institute of Physics. In response to the tsunami disaster in South East Asia, the Group provided £250,000 to the disaster appeal and committed a further £250,000 in additional funding to match employee donations.
Elsewhere, the Group has made charitable donations amounting to £468,000 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 The Smithsonian National Air and Space Museum. In Germany, the Group supported a range of charities including World Children’s Day in Berlin. In the Nordic countries it supported a number of local sports and arts-based projects.
A list of the principal donations made in 2004 is available on written request to the Company Secretary.
In addition to our charitable donations, contributions of £1,317,000 were made to projects through the Group’s corporate sponsorship committee, individual business groups 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 published its first Community Report in 2004, which illustrated the range of support given to community based organisations and projects.
Examples of activities in 2004 include:
– sponsoring ViVA, an orchestra resident in Derby, through which the Group supports concert giving and music education programmes in schools;
–continuing 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 Forest Company; and
–Indianapolis-based employees supporting Habitat for Humanity by helping to construct a home for a local family.
The Group also finances the administration of the Payroll Giving Scheme for UK employees. In 2004, the scheme helped employees to make donations of over £388,000 to over 200 charities of their choice. The scheme, which was relaunched in 2004, has achieved a level of UK employee participation of 16 per cent, one of the highest in the country.
As part of community investment activities, employees are encouraged to take up opportunities for development within local community based projects around our sites. Examples include:
–education business partnerships running successful mentoring and literacy programmes for school pupils;
–participating in the UK’s Science and Engineering Ambassadors Scheme;
–trainees undertaking community projects as part of their training programmes;
–providing support to employees who are school governors; and
–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 premises.
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 employee participation.