Veolia Water UK Plc Corporate Responsibility Report 2006 by Veolia Water

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Veolia Water UK Plc Corporate Responsibility Report 2006

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Statement from the Rt Hon John Gummer Introduction by the Managing Directors Highlights of the year The water businesses of the Veolia Water UK Group Veolia Environnement Policy development and implementation Managing the Veolia Water UK Group responsibly Our business Our goals… to manage water resources to preserve their social, ecological and economic value and to meet our customers' expectations in terms of the provision of water and related services.

Chairman’s statement

Virtual reality Statement from the Rt Hon John Gummer

24 In the workplace Our goal… to provide employees with the opportunities, resources and environment to allow them to make an effective contribution to the business.

30 In the community Our goal… to work with and support communities, charities and government towards improving the quality of life. It is very encouraging to see that the issues of CO2 and global warming are finally being taken seriously. Companies, who like Veolia have long been concerned about these issues, are being vindicated as so many initiatives are making a very real difference to the measurement and reduction of so-called “carbon footprints.” Sustainable Development as a concept is also generally better understood and is being implemented in all aspects of our lives. In the UK, for example, it is impossible to think about the countryside without considering the impact the number of houses we build will have on the use of limited water supplies. There is a concerted effort to develop a robust, considered set of proposals which will improve everyone's quality of life.

34 In the environment Our goal… to seek opportunities to reduce our consumption of natural resources by using alternative means where possible, and by optimising efficiency of use, whilst protecting and enhancing the environment.

41 Verification statement 42 Glossary 44 Invitation to comment

Notes on text and symbols This report contains information on social, economic and environmental performance during the reporting year 1st April 2005 to 31st March 2006. It is also available from www.veoliawater.co.uk.

Key Veolia Water UK target

Highlights where our programmes and targets contribute to the UK Government’s Sustainable Development Framework Indicators, part of its Sustainable Development Strategy.

Highlights progress measured against the water industry’s sustainability indicators.

Highlights progress in meeting Veolia Environnement’s sustainable development commitments.

The activities described took place during this period unless indicated otherwise. Key statistics and other information reflect either the average during the year or the position at the end of the year as the context indicates. Unless indicated otherwise the sources of this data are reports published by the Director General of Water Services.

Today we live in a world of consumer choice that our grandparents could only have dreamed of. Bottled water from Fiji, fresh exotic fruit and vegetables all year round and the finest Egyptian cotton washed in the waters of the Nile, all available for your convenience at your local supermarket. In spite of the obvious questions about long-haul cargo flights and their associated pollution, the amount of water used in the production of food and other goods is now being questioned and challenged. This year, Waterwise calculated that 70% of the water used by people in the UK comes from abroad. Called “embedded water” or “virtual water”, experts are considering the implications of countries effectively exporting their water in the forms of food, computers, clothing and cars. For example, Britons use on average about 150 litres per day. If you include embedded water that rises to 3400 litres a day.

availability of water will drop significantly. With this in mind, the Water Working Group at the World Business Council for Sustainable Development (WBCSD) is developing a mapping tool to help businesses assess their water footprints and use this data to assess the risks in relationship to the current and future availability of water. They also predict that there will be a need for global governance structures to deal with changing water scenarios. Indeed, some commentators have gone as far as to suggest that water scarcity may well become the most potent cause of conflict and war. With responsible management it should never come to that, but we all need to play our part in facing up to the reality of our situation. In a cyberspace world where virtually anything is possible, it should be possible for us to introduce the concept of “virtual water footprints” into our eco-conscience.

Rt Hon John Gummer MP Chairman of the VW UK Corporate Responsibility Advisory Committee

This illustrates the obvious need to look at the use of water right across the supply chain. Since agriculture uses most of the world’s fresh water resources, perhaps we should be calculating the “water footprint” of food as well as its “carbon footprint”. There is much evidence to suggest that climate change means that the global

Veolia Water UK Plc Corporate Responsibility Report 2006

“Responsible and pro-active” Introduction by the Managing Directors

The biggest explosion in Europe, certainly since World War II, occurred early on the morning of Sunday 11 December 2005 at the Buncefield Oil Depot in Hemel, Hertfordshire. Three Valleys Water subsequently called on all of the resources available within the group to work with the Environment Agency to minimise the impact of the environmental contamination both from the fire itself and from the effects of putting the fire out. The Drinking Water Inspectorate subsequently commended Three Valleys Water for their approach, citing it as “responsible and pro-active” with their dissemination of information both “comprehensive and reassuring”. As well as supplying 15 million litres of water each day to the Buncefield area over the four days of fire-fighting, Three Valleys Water also managed to maintain a normal level of service to their customers during and after the incident. The drinking water supplied in the area has remained safe to drink and meets the stringent standards set by the Drinking Water Inspectorate. Whilst nobody would wish to see a catastrophe like this, it is always reassuring when confronted by a crisis to know that your organisation has the systems in place and the technical and professional commitment of staff to face and contain an emergency with such success. We are continuing to monitor the area in order to ensure that all possible precautions are being taken to protect the local groundwater from contamination. On a more mundane, but equally important level, all of our companies have an on-going operational challenge in finding solutions to the recent drought conditions. This will continue to be a major issue, particularly since the Met Office has predicted that 2007 could be the warmest year yet – possibly breaking the records set during 2006 which was the warmest year on record across the UK.

Veolia Water UK Plc Corporate Responsibility Report 2006

On 1st March 2006, Folkestone and Dover was granted Water Scarcity Status by the Secretary of State. This will enable the company to achieve its target to have 90% of its customers paying by measured account by 2015. Our other companies are also making progress in this area, Three Valleys Water has installed nearly 47,000 domestic meters in this reporting year. So far there has been a largely positive response from customers. Right across the group, the efficient use of water, one of our key messages, has been the subject of many informational and educational promotions. Three Valleys Water and Folkestone & Dover Water have joined forces with the seven water companies most affected by the drought in the South East to set up “Beat the Drought”. The objective of this joint partnership is to provide the public with consistent and up-to-date information about the drought and to promote water efficiency. Tendring Hundred Water Services was not adversely affected by drought conditions, but continued to actively promote the efficient use of water whilst recording the lowest level of leakage in the UK water industry and made progress on all Ofwat-defined levels of service. Veolia Water Industrial Outsourcing saw continued growth in delivering sustainable solutions in industrial water management. This is the eleventh report in a series of Environmental, Social and latterly Corporate Responsibility reports. In this report we can demonstrate how all of our water companies maintained good services for customers, reduced leakage (ahead of targets) and maintained the provision of water of the highest quality. The evolutionary progress from our environmental reporting has allowed us to develop and integrate the concepts of sustainable development, business ethics and transparency into all our activities. Corporate Responsibility is about taking a holistic view of the business and growing it in a successful and sustainable manner whilst meeting the expectations of its shareholders. The two are inextricably linked.

We have developed a practical model of Corporate Responsibility management and a robust method of information gathering and reporting that truly reflects the performance of the Group. We have successfully met the demands of our regulators and increased our support of local and national community activities. Our core business of drinking water supply and sustainable industrial solutions consistently deliver products and innovative services that are of a high quality. In addition, we provide healthy financial returns for our investors, whilst continuing to play a full role as a responsible corporate member of the local and national community. We were very pleased to maintain our ranking as one of the top ten “Companies that Count” in the Business in the Community Index of Corporate Responsibility. This appraisal reflects publicly our commitment to protect the environment and enhance the lives of the local communities that we serve. Whilst we will always need to rise to the many challenges of resources, climate variances and unforeseeable disasters, we are quietly confident that we are moving in the right direction.

David Alexander Managing Director, Veolia Water UK Plc

Peter Darby Managing Director, Three Valleys Water PLC

David Walton Managing Director, Folkestone & Dover Water Services Limited

Andy Smith Managing Director, Tendring Hundred Water Services Limited

David Wright Managing Director, Veolia Water Industrial Outsourcing Limited

François Darley Executive Officer, Veolia Water Partnership Limited (Left 31 March 2006)

Veolia Water UK Plc Corporate Responsibility Report 2006

Highlights of the year Our Statement of Corporate Responsibility Policy and Principles (p.12) incorporates our environmental, social and economic policies and principles which underpin our goal of continuing to develop in a sustainable manner.

1st

£121 k Top10

Tendring Hundred Water’s performance on water supply and customer service.

Group company donations to charities.

Joint seventh in the ‘Top 100 Companies that Count’, as leading water company.

How did we perform this year? Environmental performance

Social performance

Economic performance2

• For the eleventh year running none of the companies was prosecuted under environmental legislation nor were any water pollution enforcement notices served.

• Tendring Hundred Water was judged best performing company by Ofwat for water supply and customer service.

• Turnover for the 12 months to December 2005 was £238.5m, compared to £211.6m for the previous year. Group operating profit was £73.9m (2004: £59.5m). This will allow companies to continue to invest in capital programmes to improve water quality and supply.

• We received a letter from the Environment Agency relating to the burst of a 21" main at Ickenham and the subsequent discharge which stirred up sediment in ponds before entering the local stream. • We supplied drinking water of the highest quality. • We reduced the risks of incidents principally through catchment protection and upgrading treatment works. • All three companies achieved leakage rates better than their targets; we continue to perform better than the industry 1 average . Folkestone & Dover Water beat its target by almost 5%. Tendring Hundred Water has the lowest leakage levels in England and Wales. • The Environment Agency approved our Water Resources and Drought Plans. • We improved the fuel efficiency of our vehicles. • We carried out biodiversity surveys at 12 sites on company holdings. • Three Valleys Water was commended for its work with the Environment Agency and Drinking Water Inspectorate, following the Buncefield incident. • Our score for the Business in the Environment Index of Corporate Environmental Engagement 2005 was above the average of FTSE 100 companies.

1 ‘Industry average’ means the average of all the water service companies and water supply companies in England and Wales.

Veolia Water UK Plc Corporate Responsibility Report 2006

• We continued to develop programmes to support education. • We updated our Safeguard Register to ensure we continue to satisfy the individual requirements of vulnerable and special needs customers. • We are on target to meet the industry-wide initiative ‘Clearwater 2010’ target to reduce Health and Safety Incidents by 30% by 2010. • We continued our ‘Well Being’ programme for employees. • Staff turnover decreased slightly to 19.4%. • Our score for the Business in the Community Corporate Responsibility Index 2005 placed us joint seventh in the ‘Top 100 Companies that Count’, as leading water company.

• Capital expenditure was £47.0m (2004: £55.7m). • The Group participated in and benefited from research undertaken by other companies within the Veolia Environnement SA Group. Expenditure in the UK in the year exceeded £732,000 (2004: £678,000).

2005

2004

Turnover (£m)

238.5

211.6

Profit before tax (£m)

90.5

66.8

Capital expenditure (£m)

47.0

55.7

Expenditure on R&D (£m)

0.73

0.68

• Veolia Water UK companies have suffered financially from the introduction of the Climate Change Levy despite significant efforts to conserve energy. • The Group complied with its policy to settle terms of payment with suppliers when agreeing terms of business and to pay in accordance with contractual and other legal obligations. The payment policy applies to all payments to creditors for revenue and capital supplies of goods and services. • The Veolia UK Pension Plan provides employees with a selection of benefits based upon final pensionable pay or money purchase according to the members’ wishes and date of entry to the scheme. The final pensionable pay scheme is now closed to new entrants. • Donations for charitable purposes made by Group companies during the year amounted to £121,000 (2004: £71,000), together with £12,000 (2004: £86,000) of sponsorship. The Group made no political contributions.

2 From Veolia Water UK Plc Annual Report & Accounts 2005

Veolia Water UK Plc Corporate Responsibility Report 2006

The water businesses of the Veolia Water UK Group

Veolia Environnement

The water businesses of the Veolia Water UK group comprise three water supply companies:

Veolia Water is part of Veolia Environnement, the world’s leading environmental services group.

• Folkestone & Dover Water Services Limited • Tendring Hundred Water Services Limited • Three Valleys Water PLC

Veolia Environnement is over 150 years old. It is listed in a number of socially responsible investment indices: FTSE4Good, ASPI Eurozone, and Ethibel Sustainability. It has also been selected by the managers of the socially responsible funds Storebrand and Innovest.

together with Veolia Water Partnership (VWP), Veolia Water Industrial Outsourcing Ltd (VWIO) and Veolia Water UK Plc (VW). Each of the water companies supplies water to customers within a designated supply area; they do not provide sewerage services. Veolia Water Partnership provides planning, engineering, scientific and laboratory services. The partnership will be dissolved on 31 December 2006 and absorbed into Three Valleys Water PLC. Veolia Water Industrial Outsourcing provides sustainable solutions to water and wastewater management problems for industry; Veolia Water UK oversees the three water supply companies, as well as Veolia Water Partnership and Veolia Water Industrial Outsourcing, providing support in relation to corporate matters.

In 2005 Veolia Environnement’s drive for greater transparency and clarity was symbolized by its rebranding. Across the world Veolia Environnement’s 270,000 employees now operate under a single brand name. The group’s activities comprise water (Veolia Water), water equipment design and supply (Veolia Water Solutions & Technologies), waste management (Veolia Environmental Services), energy services (Veolia Energy) and transport (Veolia Transport). The group is listed on the Paris and New York stock exchanges. Net revenues for 2005 were €25.2bn. Veolia Environnement companies (Veolia Water Solutions & Technologies, Veolia Environmental Services, Veolia Transport, Veolia Energy and Veolia Water), have been developing a strong presence in the UK since the mid-1980s. Together the UK companies employ approximately 11,000 people and had a turnover of £1.1bn in 2005.

Folkestone & Dover Water Services Ltd

Tendring Hundred Water Services Ltd

Three Valleys Water PLC

Population served (‘000s) 159

Population served (‘000s) 153

Population served (‘000s) 3,054

Employees 78

Employees 65

Employees 868

Veolia Water UK Plc is the corporate head office, based in London. Employees 26

Veolia Water Partnership (VWP) provides planning, engineering, scientific and laboratory services. The partnership will be dissolved on 31 December 2006 and absorbed into Three Valleys Water Plc. Employees 161

Veolia Water Industrial Outsourcing Ltd (VWIO) provides sustainable solutions to water and waste water management problems for industry. Employees 44

Veolia Environnement is the world leader in environmental services.

Veolia Water World no. 1 in water services.

Employees 252,000

Employees 67,800 employees,

Countries 65

Countries 55

Customers Over 225 million

Customers 110 million

Veolia Environnement and Sustainable Development Veolia Environnement is a member of the World Business Council for Sustainable Development (WBCSD) and Entreprises pour l'environnement (EPE). The group supports the following initiatives: Global Reporting Initiative (GRI), Greenhouse Gas Protocol Initiative, United Nations Global Compact, Global Business Coalition on HIV/AIDS, and the World Resources Institute (WRI). Veolia Environnement Institute The Veolia Environnement Institute aims to contribute to the thinking and debates about the future of our environment. Constituted in France as a non profit organisation, the Veolia Environnement Institute operates from a long-term perspective. With the help of its Foresight Committee, made up of renowned specialists, the Institute’s mission is to anticipate changes in various

Veolia Environmental Services (formerly Onyx) World no. 2 in waste management.

Veolia Transport (formerly Connex) Europe’s no. 1 private passenger transport company.

Employees 78,770

Employees 61,300

Countries 38

Countries 24

Veolia Energy (formerly Dalkia) European no. 1 in energy services. Employees 43,300 Countries 34

For a detailed explanation of the organisation and ownership of the Veolia Water UK Plc group, as well as economic performance, please see the Annual Report & Accounts.

Veolia Water UK Plc Corporate Responsibility Report 2006

Veolia Environnement Continued Veolia Environnement’s corporate values The fundamental corporate values of Veolia Environnement to which the Group adheres are: • Customer focus • Responsibility • Innovation

Policy development and implementation

• Performance • Team Work

VE Sustainable Development Charter

Veolia Environnement Institute Continued fields such as environment and health, sustainable economics, climate change and urban growth. Since its creation in 2001 it has launched more than 15 studies and created an important network with academia in Europe, China, North America and North Africa. In January 2006, in partnership with French IDEI, the Institute hosted an event entitled “Public services and management: designs, issues and implications for local governance”. Thirty international economists gathered in Toulouse to debate these issues. A conference called “Energy, environment and development: analysing Opportunities for reducing poverty” is planned for December 2006 in Bangalore with the purpose of bringing together Asian experts to discuss the links between energy, the environment, and poverty. More than 60 speakers, some of them chosen based on their scientific contributions and others for their recognized expertise in the subjects under discussion, will debate a wide variety of issues from energy, lifestyle, and technological advances, to globalization, R&D, and more. For more details see http://www.institutveoliaenvironnement.org/en/. Sustainable Development reporting In early 2006 Veolia Environnement published its 2005 Sustainable Development Report, its sixth such report, covering the activities of the group worldwide. It is available at www.veoliaenvironnement.com. The water group in the UK contributed information from its own performance measurement systems.

VE’s sustainable development approach allows stakeholders’ expectations to be taken into account and contribute to business development. It is founded on a 10-point Sustainable Development Charter:

Regulators: Drinking Water Inspectorate, Environment Agency, Ofwat, CCWater

VW Sustainable Development Commitments

VWUK Corporate Responsibility Policy

2. To establish and deploy an environmental management system enabling objectives to be identified, action plans to be implemented and progress to be monitored.

3. To ensure that our facilities and services comply with relevant Three Valleys Water

legislation, taking account of standards as they develop.

Folkestone & Dover Water

Tendring Hundred Water

Veolia Water Industrial Outsourcing

4. To go beyond minimum legal requirements in terms of improving personal health and safety protection.

5. To increase our efforts in terms of research, development and innovation in order to improve our ability to respond to environmental challenges.

Policy, objectives & targets Veolia Water Partnership

6. To develop our employees’ skills, to encourage them to take responsibility and to promote corporate innovation.

To encourage our partners, sub-contractors and suppliers to abide by our sustainable development commitments.

8. To anticipate the needs and expectations of the public for environmental services.

9. To participate in the social development of communities where our facilities are based.

and to work with all stakeholders in facilitating access to essential services and towards the respect of fundamental rights. VE translates the principles and goals of sustainable development into concrete action around the world. Here in the UK, the Charter’s ten commitments inform the development and implementation of Veolia Water UK’s policies, procedures, goals and targets (where you see this symbol ).

Veolia Water UK Plc Corporate Responsibility Report 2006

Water industry sustainability indicators

To protect the environment, to preserve natural resources and encourage biodiversity.

10. To promote the commitments made in the UN Global Compact

Policy, goals & objectives

UK Government Sustainable development strategy

The UK Government’s Sustainable Development Strategy In addition to reporting on how we contribute to VE goals and targets, we report also (where you see this symbol ) on how our programmes and targets contribute to achieving the UK Government’s Sustainable Development Strategy. The Strategy, issued in 1999, was re-launched in March 2005. It includes actions to follow up the United Nations World Summit on Sustainable Development in 2002, and covers four priorities of sustainable consumption and production, climate change, natural resource protection and sustainable communities. Progress towards achieving these objectives is measured using a range of indicators.

Water industry sustainability indicators The UK Government’s strategy for sustainable development has influenced strongly a project by Water UK, the industry’s trade association, to report annually on the water industry’s contributions to sustainability. We have taken the opportunity in this report to measure our progress against the indicators developed for this report (where you see this symbol ). What do we mean by corporate responsibility? Corporate responsibility is good management, or the means by which an organisation fulfils its obligations to its stakeholders – see our policy overleaf. A stakeholder is an individual or group who has a legitimate interest in influencing or being affected by a decision.

Veolia Water UK Plc Corporate Responsibility Report 2006

Veolia Water UK Plc Corporate Responsibility Summary of the Companyâ&#x20AC;&#x2122;s Statement of Policy and Principles.

The primary objectives of our business are to deliver sustainable water management services to our customers and a financial return to our investors. We will conduct our business in accordance with the highest standards of corporate responsibility and Veolia Environnement company values, in order to protect and enhance the welfare and interests of our stakeholders and the environment. We will maintain efficient and effective systems for risk management to contribute, among other objectives, to the implementation of this policy. We will regularly review this statement, its implementation and effectiveness, and modify it in the light of practical experience. We will strive to improve our performance continuously, monitor key aspects of this policy and publish a full report regularly. More generally, we will communicate openly about our policies, plans and performance. This statement is a key part of the companyâ&#x20AC;&#x2122;s overall strategy and operating policy. It will be taken into account in setting performance objectives of subsidiaries and individual units. We will ensure that our employees act in accordance with the policy.

Environmental policy We will seek to contain the negative environmental impacts of our activities to the practicable minimum through applying our environmental principles. We will strive to meet the environmental standards required by legislation, regulation and codes of practice. Where practicable, we will seek to enhance the environment, encourage conservation of, access to and recreation on our landholdings, and communicate with environmental groups, local government and the community on environmental matters.

Veolia Water UK Corporate Responsibility Reports

3V CR Report

FD CR Report

External Verification

VWUK summary leaflet

TH CR Report

Veolia Water UK Plc Board

VWUK investors sheet

Veolia Water UK Plc Corporate Responsibility Advisory Committee

Social policy We will act in a manner consistent with maintaining the welfare and interests of stakeholders and, where possible, we will seek to make a positive contribution to them.

Safety, Health & Environment Managers

Economic policy In the interests of our stakeholders, we will conduct our activities as efficiently, effectively, ethically and profitably as possible on a long-term basis. We will seek to maintain our assets to ensure that high standards of service can be ensured both now and in the longer term.

Folkestone & Dover Water (ISO 14001)

Tendring Hundred Water (internal management system)

Three Valleys Water (Balanced Scorecard)

Veolia Water Partnership (internal management system)

Veolia Water Industrial Outsourcing (ISO 14001)

EXTERNAL REGULATORS Environment Agency

Office of Water Services (Ofwat)

Consumer Council for Water (CCWater)

Drinking Water Inspectorate (DWI)

Health & Safety Executive (HSE)

Department for Environment, Food & Rural Affairs (DEFRA)

The full statement of policy and principles can be viewed at www.veoliawater.co.uk.

Veolia Water UK Plc Corporate Responsibility Report 2006

Managing the Veolia Water UK Group responsibly At Veolia Water UK we aim to manage our businesses in line with our Statement of Policy and Principles on Corporate Responsibility (see summary on p.12) and applying the principles of risk management.

The Managing Director of each company has overall responsibility for corporate responsibility performance and reports on this to the company’s Board. Each company has one or more Corporate Responsibility Champions responsible for promoting initiatives, monitoring performance and internal communication. Particular attention to corporate responsibility is also paid at Board level, thanks to: The Right Honourable John Gummer MP, non-executive Chairman of Veolia Water UK Plc with special responsibility for the environment and Chairman of the Corporate Responsibility Advisory Committee to the Board. Dr Neil Summerton CB, non-executive director of Three Valleys Water, where he takes a close interest in corporate responsibility, and of Folkestone & Dover Water Services, where he has specific responsibility for environmental policy and performance. He advises Veolia Water UK on economic and environmental regulation and is a member of the Corporate Responsibility Advisory Committee.

Engaging with our stakeholders Our companies engage with their stakeholders about their requirements and expectations, using various means, including this report. Examples of how we engage • Customers: information leaflets sent out with bills, company Internet sites, media press releases, call centres, and regular contact with the Consumer Council for Water (formerly WaterVoice), the organisation that represents the interests of customers on issues such as price, service and value for money • Employees: regular staff satisfaction surveys; statutory safety committees; Joint Negotiating Consultative Committee; monthly Team Briefing; internal magazines Splash! and Cascade; Toolbox Talks, employee feedback sessions on fulfilling our corporate responsibility (for which a summary of this report is produced) • Local communities: - The water companies employ communication strategies to support disruptive work in the community - Three Valleys Water’s award-winning Environment & Education Centre educates both existing and future customers in water efficiency and environmental conservation - Working with local management groups, eg Friends of Stockers Lake, Wraysbury Lakes Liaison Group (Three Valleys Water), the White Cliffs Countryside Project (Folkestone & Dover Water), Essex Biodiversity project and Essex Wildlife Trust (Tendring Hundred Water) • Regulators: eg we work with English Nature when laying a main through a specially designated area such as a Site of Special Scientific Interest

• Government partnerships: Folkestone & Dover Water is a partner organisation to Partners for Water & Sanitation, a UK tri-sector partnership initiative (between Government, civil society and private sector organisations) to assist developing countries, initially from Africa, to provide clean water and adequate sanitation • Local government: we liaise with Local Area and Health Authorities so that there is a better understanding of local water quality issues. Meetings are accredited as continuing professional development for those attending • Investment community: we prepare a one-page summary of our policies and performance, inviting feedback We are in turn engaged by a number of bodies, eg: • Industry: Water UK, CBI, Environmental Analysis Co-operative, Business in the Environment, Business in the Community, Business Council for Sustainable Development UK • Peer group companies: “Beat the Drought” • Customers: GSK Stakeholder Panel • Charities: Groundwork, WaterAid, KitAid, Herts Community Foundation • Government: Thames Regional Environmental Protection Advisory Committee, Associate Parliamentary Environment Group, Kent Sustainable Business Partnership • NGOs: National Society for Clean Air, Oxfam • Regulators: working groups of the Environment Agency, Ofwat and DWI • Academia: Universities of Herts, Surrey and Brunel

• Industry & agriculture: we have developed communications strategies with the hydrocarbons industry, agriculture, and the chemicals industry to prevent pollution of water resources

Veolia Water UK Plc Corporate Responsibility Report 2006

Per capita water consumption (litres per head per day) (excl. supply pipe leakage)

Tendring Hundred Water Measured Unmeasured

Folkestone & Dover Water Measured Unmeasured

Three Valleys Water Measured Unmeasured

Our business Our goals… to manage water resources to preserve their social, ecological and economic value and to meet our customers' expectations in terms of the provision of water and related services . Industry average

These goals underpin the companies’ business plans for 2005-10 and the longer term. Our plans, as approved by Ofwat and the Environment Agency, tackle supply and demand imbalances using a twin track approach to develop our water resources whilst also encouraging careful water use. They include increased meter penetration to manage demand, and making better use of existing water resources by investing in infrastructure to improve our ability to transfer water across our supply areas to the places where it is needed most at any particular time. We are also conscious of the ageing of our network, and have established long-term investment plans to improve the sustainability of our product and service. We are also increasing investment in pipe renewals, targeting our works in areas suffering most from high rates of mains bursts. This investment will reduce the inconvenience caused by supply interruptions and by street works to repair burst mains. 1

Management systems

Formal environmental, health and safety, and quality systems are fundamental to continuous improvement in our performance. These systems are at various stages of maturity throughout our businesses and are being integrated into the overall systems for managing the business. All the regulated businesses have upgraded their quality systems to meet the new ISO 9001:2000 standard. The introduction of systems that are compliant with the ISO 14001 standard at priority sites is a target set by the Veolia Environnement group. It is essential that certification to the standard adds value to our business and undergoes a detailed analysis of benefit and cost. Folkestone & Dover Water Services’ integrated management system meets the requirements of ISO 9001 (quality management) and ISO 14001 (environmental management).

The company is working towards achieving OHSAS 18001 (occupational health management). Veolia Industrial Water Outsourcing’s environmental management system is certified to the ISO 14001 standard. Tendring Hundred Water is committed to achieving this standard in the near future. Three Valleys Water’s health and safety, quality, and environmental management system is integrated into the overall company Balanced Scorecard, the key management tool which enables the Board to monitor performance in a comprehensive way. Managing the supply chain Veolia Environnement is committed to encouraging partners, subcontractors and suppliers to adhere to its sustainable development commitments. The VE Purchasing Charter sets out the values to be applied in purchasing goods and services from others. These include health, safety and environmental considerations, and the way suppliers must be treated. VWUK companies have adopted as far as practicable the Group purchasing policy, mindful of Ofwat’s requirement for water companies to have a transparent system to show trading at arm’s length from associated companies. We have developed and applied environmental and social criteria for use in supplier selection and performance procedures. During the year Three Valleys Water’s restructuring of its asset investment function, which is responsible for delivering its £350m programme of works up to 2009, led to the appointment of the project and construction management company, Mace Ltd. The restructuring has succeeded in aligning investment targets across the business, with greater transparency and more efficient work practices, and has led to improved relationships with contractors. Mace is also working with Three Valleys Water on its approach to health and safety and environmental management.

1 Consistent with the UK Government’s Sustainable Development Framework indicator for river quality, and the indicator for water resource use

Measured

Managing for sustainable development We manage our business to satisfy the needs of existing and future stakeholders. We do this by balancing the demand for water against the availability of water resources in the areas where we operate, while protecting water resources and the environment generally. Due to the pressure on water resources in South East England, this requires innovative solutions. We do not act alone; the Environment Agency plays a major role in determining the availability of resources and determines licence applications to abstract water between competing demands, while Ofwat and the Consumer Council for Water are concerned for the interests of our customers. Our companies submit detailed Water Resource Plans to the Environment Agency, as well as drought contingency plans every three years. These plans are reviewed annually, and an update supplied to the Environment Agency. An important measure of companies’ water resources positions is 3 the security of supply index, as reported to the regulator Ofwat . This gives information on a water company’s headroom (see glossary), that is its ability to supply customers in dry years without introducing restrictions such as hosepipe bans. According to the index the supply:demand balance of Tendring Hundred Water and Three Valleys Water is adequate.

Veolia Water UK Plc Corporate Responsibility Report 2006

Meets VE commitment to deploy an environmental management system

Domestic demand for water Other indicators used in forward planning water resource management are: • per capita consumption rate. As the Government expects 1.1 million additional households to form in the South East & London by 2021, future household demand is a key driver of water resource planning • changes in climate patterns, with increased unpredictability in the areas in which our companies operate • changing patterns of land use such as urbanisation and land drainage To plan for these effects, our companies’ Water Resources plans considered different climate scenarios, development patterns and demand conditions. As a consequence of this planning and effective management, the companies have been able to restrict the need for hosepipe bans. Average demand for water in 2005/6 was approximately 1% lower than the previous year. Three Valleys Water’s customers however continue to exceed the industry average for per capita water consumption, whereas Tendring Hundred Water’s customers have the country’s lowest per capita water consumption rates.

We have provided input to Ofwat’s interpretation of its new duty to contribute to sustainable development. Despite delivering an increase in the amount of water available for use in 2005-6, Folkestone and Dover Water continues to have a large deficit against headroom.

2 Relates to water industry sustainability indicator for managing environmental and sustainability issues

Unmeasured

3 Water industry sustainability indicator

The security of supply index is also a water industry sustainability indicator

Veolia Water UK Plc Corporate Responsibility Report 2006

Our business Continued

Total leakage achievements (incl. communications pipes) Leakage achievements: actual and target rates of total leakage: megalitres/day Folkestone & Dover Water Measured Unmeasured

Case study: Water scarcity status

150

100 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06

Using water more efficiently… actions Water efficiency measures help to bridge the potential gap between demand and supply. During the year the number of customers with metered supply increased. All three companies operate a number of repair, maintenance and water conservation programmes. All three companies promote water efficiency in their publications and at the events they attend, as well as in the local and national media. They tailor their promotion of the efficient use of water to their stakeholders, including local councils and regional planning authorities, in accordance with their duty to conserve water under the Water Act 2003. Pipeline construction in the Alkham Valley Celebrating the fitting of the last meter in Lydd Folkestone & Dover Water Head Office

To influence future domestic Three Valleys Water contributed to the South East and East of England regional housing and spatial plans and are in contact with local authorities to encourage them to take water conservation into consideration within their planning departments. The company continued to promote its Self Water Audit during the year to enable customers to calculate how much water they use in the home , and how much they can save by making small changes to normal daily activities. In all, nearly 4,000 customers completed the audits. Folkestone & Dover Water and Three Valleys water joined up with the other water companies most affected by the drought in the South East, and formed a partnership called “Beat the Drought”. Working with the Environment Agency, this initiative has broadened the scope of the individual companies’ on-going efforts to encourage the most efficient domestic use of water. (See www.beatthedrought.com for more information).

Water industry sustainability indicator

Veolia Water UK Plc Corporate Responsibility Report 2006

200

96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06

Target

Folkestone & Dover Water led the way for the water industry in becoming the first company to apply for and achieve Water Scarcity Status. The government is now urging other companies to follow its example.

250

5 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06

To meet these challenges the company has developed a twin-track approach, on the one hand investing substantially in new infrastructure and resources and on the other developing further its demand management programme. The granting of Water Scarcity Status is an essential step forward in demand management as it gives the company the power to introduce meters on a compulsory basis. More than 40% of customers are metered, and this is planned to increase on a phased basis to 90% by 2015.

Three Valleys Water Measured Unmeasured

In granting the status the Department for the Environment, Food & Rural Affairs (Defra) acknowledged the long-term challenge of supplying water in the area. The company has no surface water to draw on, relying entirely on underground sources in chalk and gravel aquifers. Added to this, projections show that the climate in the area is likely to become even drier.

Tendring Hundred Water Measured Unmeasured

Having achieved consistent levels of leakage, the companies intend to continue to achieve these levels in 2006/7. In the latter part of 2005,Three Valleys Water ran a zany student campaign at the University of Hertfordshire. “Do you know your H2O”, was very successful in achieving a noticeable reduction in water usage, whilst getting the message across that water is a valuable resource. This campaign was recently commended by a judging panel at the Water Efficiency Awards hosted by the Environment Agency. Leakage During the year all three water companies met a Veolia Environnement network efficiency target set at 80%. All three companies met leakage targets set by the regulator, Ofwat, with Three Valleys Water and Folkestone & Dover Water achieving rates better than their targets. In the case of Folkestone & Dover Water the target was beaten by almost 5%. Tendring Hundred Water continues to have the lowest level of leakage per property in the industry. Its performance is very close to the minimum achievable. “It is essential that water companies can demonstrate that they are doing all they can to limit leakage, particularly in areas where resources are stretched. Most companies are doing this, and it's great to see… Folkestone & Dover Water bettering [its] target[s].” Dame Yve Buckland, Chair of the Consumer Council for Water

Consistent with UK Government’s Sustainable Development indicator for domestic water consumption

Veolia Water UK Plc Corporate Responsibility Report 2006

Our business Continued

3.3m 65% £0.75m The number of people receiving water supplies from Veolia Water UK companies.

Metering is an important demand management tool as surveys show that households fitted with a water meter use approximately 10-15% less than those without a meter. Its use is however limited due to current legal restrictions. All three companies continue to offer metering free of charge, installing over 43,500 in 2005/6. 65% of all Tendring Hundred Water’s customers now have a meter, 46% of Folkestone & Dover Water’s and 29% of Three Valleys Water’s. On average across the group, almost one in two customers now has a meter. As part of the targets to guarantee water supply security in a region that has half the average nationwide rainfall, Three Valleys Water will increase metering, aiming to have 44% of domestic properties across its region metered by 2010. Folkestone & Dover Water aims to have 90% of its 170,000 customers metered by 2015.

Drinking water quality During the year we provided drinking water of the highest quality to over 3.3 million people. In its report ‘Drinking Water in England 2005’, the Drinking Water Inspectorate (DWI) details the performance of water companies in delivering high quality drinking water, as well as issues consumers raise with their water companies, and the expectations of health and local authorities. The quality of the drinking water we supply to our customers continues to be of a very high standard, with Three Valleys Water exceeding the industry average. It should be remembered that UK water standards are among the highest in the world. There were no water quality incidents at Folkestone & Dover Water or Tendring Hundred Water during the year that affected drinking water quality. At Three Valleys Water there were four incidents during the year in which drinking water quality deteriorated so that remedial action had to be taken. Each was of only short duration.

Three Valleys Water arranges regular meetings with local authority health professionals on local water quality issues, to promote a greater shared understanding. The company has obtained the agreement of the Faculty of Public Health Medicine and Chartered Institute of Environmental Health for these meetings to be accredited as continuing professional development for those attending.

Chlorination Our companies use two methods to chlorinate water: chlorine gas (either generated on site or delivered in cylinders) or sodium hypochlorite solution. Since 1995 they have monitored and greatly reduced their use of chlorine gas, because of the handling, storage, environmental, health and safety issues associated with chlorine gas, in favour of less hazardous sodium hypochlorite.

Treating water

Three Valleys Water’s water treatment plant at Iver has reduced its environmental and social impacts by ceasing to use chlorine gas.

All water that enters the public water supply has to be disinfected. This is normally achieved through filtration and the use of chlorine or ultra violet light. The Veolia Water UK companies’ approach to water quality is based on the precautionary principle of applying controls wherever assessments indicate that a risk may be present. 25% of the water Three Valleys Water put into supply is now treated through membrane plant. Folkestone & Dover Water has the highest proportion of membrane treatment capacity compared with other water companies. Ultrafiltration and microfiltration membrane plants can reduce the quantities of chlorine required for disinfection, thereby reducing the environmental impact associated with the use of chlorine compounds. Another advantage is the significant reduction in water loss, chemical usage and solid waste produced in the treatment process . Membrane plants allow for washwater from the plant to be recycled to the head of the works instead of running to waste. The need for ever more complex water treatment (such as ozonation, double stage filtration for pesticides etc, granular activated carbon adsorption, airstripping of volatile organic compounds, orthophosphate dosing for lead, ultrafiltration for cryptosporidium etc) inevitably results in using more energy per unit of water produced. In order to keep this increase to a minimum, we use energy generated from renewable sources.

Consistent with the UK Government’s Sustainable Development Framework indicator for river quality

Veolia Water UK Plc Corporate Responsibility Report 2006

The number of Tendring Hundred Water customers who have a meter.

The amount invested during the year in research projects.

Emergencies Each company has procedures in place to provide appropriate responses to incidents, ranging from a major burst to a breakdown of IT systems and terrorist action. Drills are carried out regularly to test their effectiveness and communication/cooperation with external agencies and service providers.

Research and development In the UK, Veolia Water companies invested over £0.75 million during the year in research projects devoted to specific company and collective industry issues . Key projects include: • Water quality in the distribution system • Development of Water Safety Plans • Behaviour of soil conditions and their contribution to bursts and leakage • Impacts of climate change on supply and demand balance

Corroded water pipe

• Development of a pollution assessment tool for water resource protection

Analysing water samples

• Investigation of the ecological impacts of low flow rivers • Application of a biodiversity methodology to pilot sites

Meets a VE commitment to increase R&D in order to be able to respond to environmental challenges

Water industry sustainability indicator for investment in research

Veolia Water UK Plc Corporate Responsibility Report 2006

Our business Continued

Case study: Buncefield Oil Depot explosion

The biggest explosion in Europe, certainly since World War II, occurred early on the morning of Sunday, 11 December 2005, in Hertfordshire.

Throughout the fire-fighting phase of the incident we provided the Environment Agency and Drinking Water Inspectorate (DWI) with

Veolia Water UK Plc Corporate Responsibility Report 2006

Courtesy of Chiltern Air Support

As Hemel Hempstead is within the Three Valleys Water area, we played a key role in the ensuing emergency response. Our Water Quality Services department was concerned about the overall impact of the fire fighting activities on groundwater supplies and the prospect of escaping fuel contaminating the ground. Just a few hours after the explosion we contacted the Environment Agency to urge them to communicate to those planning to tackle the fire the need to consider the impact on the environment. Three days later our operations team accessed the site to fit non-returnable valves on the water mains leading into the area, to prevent water from the site re-entering the water mains.

Courtesy of Herts Constabulary

It was felt 100 miles away and destroyed a large part of the Buncefield Oil Depot near Hemel Hempstead, causing severe damage to nearby office buildings, factories and workshops. The blaze lasted several days and was accompanied by a huge plume of smoke which spread across large areas of south England and could be seen from space. Miraculously no-one died.

Customer service

written and verbal updates. We continue to work with them to monitor the long-term impacts on the environment. The DWI has commended us for our approach, citing it as “responsible and pro-active”, with information shared to date “comprehensive and reassuring”. Three Valleys Water is continues to work with the DWI, the Environment Agency, the Health Protection Agency and the Local Authorities to ensure that the safety and quality of future water supplies is assured and the environment is protected.

Ofwat, the water industry’s economic regulator, assesses companies' overall delivery of service to customers annually, specifically their performance regarding water pressure, unplanned interruptions, billing queries, complaint handling and meter reading. In the 2005-06 Overall Performance Assessment (OPA) report, Tendring Hundred Water was awarded first place amongst all the water supply companies in England and Wales. This is the fourth time in five years that the Company has topped the OPA ranking and the first time that a company has done so with a perfect score. Folkestone & Dover Water also maintained excellent levels of customer service despite significant increases in all types of customer contact as a result of the company’s application for area of water scarcity status. Three Valleys Water was in the top performance band in four of the five indicators. All of our companies have targets to maintain high levels of customer service. During the year, all three water companies introduced new customer information leaflets to accompany water bills. For customers who do not have English as a first language, information can be translated into 100 different languages. Special needs customers registered on Three Valleys Water’s Safeguard Scheme benefit from additional services such as a password scheme for entering a customer’s property, priority deliveries of bottled water in the event of supply interruptions, and bills in large print and Braille.

In recognition of the fact that not all customers are able to install a meter if they would like one, Three Valleys Water and Tendring Hundred Water have developed an assessed tariff based on estimated consumption. Industrial and commercial clients Veolia Water Industrial Outsourcing (VWIO) works in partnership with industry to provide environmentally aware, cost-effective water processing, recycling and wastewater management. The company operates ten contracts in the UK. Three Valleys Water provides an emergency mains repair service to industrial and commercial customers in the event of a burst or leak on their premises. For customers with older networks, this service is invaluable in keeping the volume of water lost to a minimum. The Company’s Developer Services department works with property developers on the design, pricing and construction of water mains. This includes advice on how to help their customers to be more water efficient. A good working relationship with developers is essential in view of the half million new homes due to be built in the south-east in the next few years. All three companies visit their industrial and commercial customers regularly to offer advice on water consumption and conservation.

The water companies notify measured customers who may have a leak in their pipework (as identified by a high meter reading). They also offer free supply pipe repairs to domestic customers, plus a leakage allowance. If the pipe condition is too poor to mend, the customer is offered subsidised replacement.

Water industry sustainability indicator for number of vulnerable customers

Veolia Water UK Plc Corporate Responsibility Report 2006

Our business Continued

Case study: L’Oréal

L’Oréal, the world leader in cosmetics, has a large factory in Pontyclun, South Wales, which is a L’Oréal “Centre of Excellence” for shampoos, conditioners and hair styling products. At the site, continued efforts are made to reduce waste and conserve energy. The factory now recycles and/or reuses over 75% of all waste generated at the plant. In 2004, L’Oréal had to replace their existing effluent treatment plant to keep pace with increased manufacturing capability. They used this opportunity to choose a system which would not only provide them with operational savings, but would also produce an effluent that was significantly better than their existing discharge consent level and in keeping with the company’s environmental objectives and targets for continual improvement. WVIO was able to offer an aerobic effluent treatment plant capable of providing L’Oréal with the flexibility to meet future site developments and demands. VWIO is now responsible for the operation and maintenance of its effluent treatment plant, allowing the L’Oréal management to concentrate on its core business.

Household debt Affordability and household water debt are serious problems for the water industry and its paying customers. In 2002/03, water companies calculated that about 3% of household charges (or £164m) were not recoverable. This is equivalent to the charges from 700,000 households. The cost of managing and financing this debt has an impact on all paying customers, working out at just under £10 for every paying customer. The problem is expected to 3 worsen in the next few years with increasing water charges .

Payments to suppliers The Group companies are aware of the need for timely payment for goods and services received. The Group has a policy to settle the terms of payment with suppliers when agreeing terms of business and to pay in accordance with contractual and other legal obligations. During 2005 the average time taken by Group companies to settle suppliers’ invoices was 38 days, compared with 36 days for 2004 .

Benchmarking All three companies offer a comprehensive range of payment methods for those experiencing problems in paying their water bills. This is communicated by information leaflets which accompany all final and reminder bills. Customers can make payments local to their home, free of charge, and at intervals that suit their budget. Assistance is also available to vulnerable customers which involves capping their charges at the average household charge rather than the actual measured bill. At Three Valleys Water, a Customer Assistance Fund assisted 91 applicants in 2005/6 to the sum of £27,700. The scheme provides customers in debt with a fresh start provided that they make regular payments for an agreed period (typically 6-12 months) beforehand. Folkestone & Dover Water and Tendring Hundred Water have joined with four other water companies in the south-east to fund a charity that aims to help people reduce the burden of debt and meet future bills. The Eos Foundation offers financial assistance to reduce or clear arrears of domestic water charges.

Each year the Veolia Water UK group benchmarks itself against peer companies in order to understand its performance in relation to ‘best in class’ companies and identify good and better practice to help improve performance. Business in the Community Corporate Responsibility Index 2005 We took part for the fourth year in Business in the Community’s Corporate Responsibility Index. The results were published in the Sunday Times as the ‘Top 100 Companies that Count’. Veolia Water UK was ranked joint 7th and leading water company, with a score of 97.5%. Business in the Environment Index of Environmental Engagement 2005 In 2005 we took part for the 10th year in succession in the Business in the Environment Index, scoring 96%, a 2% improvement on our 2004 score, and above the average score of FTSE100 companies. You can find further details of this at www.veoliawater.co.uk.

“In VWIO, L’Oréal has a partner with the capability of undertaking other water and wastewater related projects on site and at other locations around the world.” Martyn Price, Engineering Safety & Environment Manager, L’ORÉAL MANUFACTURING (UK) LTD

Veolia Water UK Plc Corporate Responsibility Report 2006

3 From Household Debt in the Water Industry, a Water UK Briefing Paper, February 2005

Relates to water industry sustainability indicator for responsible contracting

Veolia Water UK Plc Corporate Responsibility Report 2006

In the workplace Our goal…to provide employees with the opportunities, resources and environment to allow them to make an effective contribution to the business .

Workforce profile

The social element of sustainable development concerns an organisation’s impacts on the social systems within which it operates. For our current and future employees, this translates to an objective to ensure that no employee or applicant for employment receives less or more favourable treatment, whether through direct or indirect discrimination, on the grounds of race, gender, disability, sexual orientation, religious beliefs, creed, marital or parental status. Our recruitment and selection policy is therefore based on objective criteria consistent with applicants’ skills, abilities and potential. No applicants or employees will be unfairly discriminated against on grounds of criteria not relevant to the performance of the job. This policy is consistent with Veolia Environnement objectives to anticipate demographic challenges and improve competency management, and to offer secure jobs. Net employment across the Veolia Water UK group during the year fell by 95. Average turnover was 19.4%, down from 19.9% in 1 2004 . In line with other industries, turnover in call centres is relatively high when compared with the turnover of operational staff. Low turnover can lead to a lack of up-to-date skills and experience in the businesses.

1 Meets VE commitments to develop employees’ skills, to encourage them to take responsibility and to promote corporate innovation; and to respect fundamental rights

Diversity In line with a Veolia Environnement commitment to promote diversity and combat discrimination, we record the composition of our staff. Women make up 38% of the workforce (37% in 2004) and 30% of managers (27% in 2004). Employees registered as disabled make up 0.4% (as in 2004). A review of the equal opportunities and recruitment policies has given rise to revised policies on dignity at work, conduct at work, managing absence (see below) and public interest disclosure. For the fourth year, we recorded the percentage of the workforce from ethnic minorities: 5%. This compares with estimates that the ethnic minority population in the South East region as a whole is 4%. In anticipation of European legislation on age discrimination and to ensure a balance of experience and career progression, we measure the age profile of our workforce. The average age is 40.

2 Water industry sustainability indicator for employee turnover

Veolia Water UK Plc Corporate Responsibility Report 2006

38%

Employees who received training

Percentage of women employees

Training and career development Veolia Environnement has adopted a number of objectives aimed at reducing staff turnover and absenteeism through offering secure jobs, developing high quality social protection, and offering job mobility. All VWUK companies have introduced the personal development system to provide a more structured approach to employee learning and career development. In 2006/7 Three Valleys Water aims to combine the current employee Performance Review and Personal Development Plan into an Annual Development Plan. This will allow the company to focus on employees’ technical and personal competencies and make it easier to identify appropriate training needs. 4

In 2005 , 1,240 Veolia Water UK employees received training (some employees were trained more than once), of whom 218 were managers. The total annual cost of training to the water companies (excluding salaries) as a percentage of total gross annual salary was 3 1.1% . During the year, in addition to vocational and professional courses, training was provided on health and safety in practice, driving assessments, diversity at work, and stress management.

4 Water . industry sustainability indicator for workforce diversity

1,240 5% Percentage of workforce from ethnic minorities

In addition, each water company continues to train its new entrants on the company’s environmental policies and performance through sessions at the company induction programme. Folkestone & Dover Water staff regularly participate in environmental awareness and safety training as part of the company’s maintenance of the environmental management standard ISO14001. Veolia Water Industrial Outsourcing’s management system includes a computer-based training package developed to deliver employee awareness and understanding of environmental and safety issues. Employee recognition During the year Three Valleys Water and Folkestone & Dover Water implemented schemes to reward employee behaviour that contributes to the business and supports company values. Colleagues can nominate individuals or teams, who are then judged by a panel of their peers. Winners receive a voucher for an ‘experience’ day and time off to enjoy it.

3 Figures refer to the 2005 calendar year

Relates to water industry sustainability indicator for investment in staff

Veolia Water UK Plc Corporate Responsibility Report 2006

In the workplace Continued

Checking water pressure

Locating leaks

Listening for leaks

Case study: Three Valleys Water scoops gold award

Employee consultation

Ethics

Veolia Environnement has objectives to ensure employees have representation at all levels and to monitor and evaluate employee satisfaction.

Veolia Water’s parent group, Veolia Environnement, expects that the staff of its four divisions will behave professionally at all times. This expectation is embodied in our shared guiding principles:

Veolia Water UK companies continue to work positively and progressively with trade unions. We ask our workforce regularly for their views on a range of company and personal issues. The 2005 employee survey showed a general improvement in perceptions of inter-departmental cooperation and staff competency. 59% of staff stated that they received training and development to do their job, a 19% increase on the previous year’s survey. Staff were less happy with internal communication, opportunities for socialising and career development. Individual departments are examining the results to seek to address any issues. This year, we also conducted a specific Corporate Responsibility Survey throughout the VW companies during the year to assess employees’ awareness of corporate responsibility. The results of this survey indicated that a good level of awareness of CR reporting exists and there is a reasonable understanding of CR by staff, particularly in VWP and FDWS. Comments received from respondents indicated that their roles and responsibilities are inextricably linked to the principles set out in their individual Corporate Responsibility Reports.

Veolia Water UK Plc Corporate Responsibility Report 2006

• Strict respect for the law • Honesty and integrity • Social responsibility • Risk management • Information and corporate governance • Commitment to sustainable development. At Veolia Water UK these principles are built into our policies, programmes and practices to ensure that we live the values. Managers at all VWUK companies received training during the year in the new Veolia Environnement Business Ethics Programme. The training included reminders of the companies’ duties to provide accurate information.

The in-house Public Relations Team at Three Valleys Water received the top public relations award in the 2006 Chartered Institute of Public Relations Pride Awards for the Thames and Chilterns region. The team won the ‘internal newsletter’ category for their bi-monthly staff magazine ‘Splash!’. Splash! Editor, Jodi Pastorino said: “We’re thrilled to receive this award. Our aim is to make the magazine a good read by having the right balance of serious business and fun articles which raise the profile of the hard work and effort that people put in to their jobs and to helping our local community through charitable work.”

Whistleblowing In line with UK practice, Veolia Water UK businesses have put in place whistleblowing procedures. These aim to encourage an environment in which all employees are able to raise their concerns about acts of malpractice or misconduct within the companies, without fear of reprisal or victimisation.

Veolia Water UK Plc Corporate Responsibility Report 2006

In the workplace Continued

100

Accident Incident Rate Annual number of reportable incidents* per 1,000 employees Folkestone & Dover Water Tendring Hundred Water Three Valleys Water VWP VWIO

0 99/00

00/01

01/02

02/03

03/04

04/05

05/06

*Reportable incidents’ are deaths, major injuries, accidents resulting in 3 days off work, diseases and dangerous occurrences as defined by the Reportable Injuries, Diseases and Dangerous Occurrences Regulations 1995 (RIDDOR).

Health and safety Health and safety must play an important part in the everyday culture of our companies. A Veolia Environnement commitment to improve health and safety performance underpins a target for all Veolia Water UK companies to improve existing accident and incident rates. In addition from 2005 Ofwat, in conjunction with the Health & Safety Executive, requires water companies to report on health and safety management and performance and that of their core contractors. There were no fatalities in our water companies in 2005/6. Work days lost due to work accidents amounted to 431, compared with 238 in the previous year. This now includes motor vehicle related injuries.

Managing absence With the contracting out of operational services such as mains replacement over the last decade and the growth of call centres, the water industry has developed from a largely manual-based workforce to an office-based one. An office environment presents a different range of health issues, the most common being stress. These are linked to increased levels of staff absenteeism.

Following an actuarial review of the largest of the Water Group’s Defined Benefit pension schemes, the Employers agreed a sustainable plan to remove any deficits over the next 10 years. The Group’s flexible Defined Contributions scheme which remains open to new recruits, enables members to save at flexible levels and also to take their benefits at retirement in a manner best suited to each person’s own financial needs.

All three companies have trained line managers in attendance management and make greater use of their Occupational Health Schemes. The average number of days absent in 2005/6 was 9.3 days (up from 8.9 in 2004/5).

The Pension Scheme Trustee keeps member investment options under the DC Scheme under review and considers the changing needs and preferences of members when determining the available investment options.

Work/life balance

The Pension Scheme Trustee has significantly increased its corporate governance activity over the period in anticipation of new requirements from the Pensions Regulator which have been introduced since April 2006.

Three Valleys Water recorded the health and safety performance of its contractors working on core operational activities. The reportable incident rate fell during the year from 3 to 0, and there were no major or fatal accidents. Managers at all the companies received extensive health and safety awareness training. Other courses included defensive driving workshops, stress awareness training, signing and guarding training.

Three Valleys Water and Veolia Water Partnership are committed to supporting employees who are working parents and understand the difficulties that can sometimes be associated with this. To support working parents in managing their working hours, the company has introduced a Flexible Working for Parents Policy which enables parents to be able to apply to work flexibly. The companies are also committed to reducing overtime.

The companies are on target to meet the industry-wide initiative ‘Clearwater 2010’ target to reduce health and safety incidents by 30% by 2010.

Pension schemes The Veolia Water businesses are committed to offering, and encouraging employees to participate in good quality occupational 5 pension schemes. They recognise the need to assist employees in making adequate provision for their retirement – a message constantly being reinforced by all main political parties. The Water Companies have provided occupational pensions for many decades. As a result, more than a generation of our workers have had financial provision for a more comfortable retirement.

Three Valleys Water continued its programme of initiatives to promote the awareness of Well Being topics during the year, as having a healthy workforce who maintain a positive work/life balance is a key objective for the company. Topics covered included healthy eating, heart disease awareness, help to stop smoking, and the importance of giving blood. Activities included free taster sessions by a reflexologist, workplace massages, Chi Kung sessions, and stress management sessions. The company has also negotiated a discounted membership rate for local gyms. Tendring Hundred Water has provided its staff with an in-house gym.

Veolia Water also recognises that some of its employees may not wish to participate in employer-sponsored pension arrangements, and for those, it maintains a basic level of life assurance cover to provide some protection for the employees’ dependants in the unfortunate event of an employee’s death. In all, Veolia Water recognises that the employment market is fast changing and believes it has altered its pension offerings to meet the needs of both long-serving employees and the newer, often younger and shorter-serving employees, whilst delivering a value proposition that is affordable to the business and its shareholders.

5 VE targets: to reduce frequency of accidents at work by 12% by 2006, and severity rate of accidents by 20%

Veolia Water UK Plc Corporate Responsibility Report 2006

Water industry sustainability indicator for occupational health and safety

Consistent with UK Government’s Sustainable Development indicator for pension provision

Veolia Water UK Plc Corporate Responsibility Report 2006

In the community

Case study:

Our goal…to work with and support communities, charities and government towards improving the quality of life .

Veolia Environnement Foundation helping children in Kenya

Working with the community

Three Valleys Water

All Veolia Water UK companies give extensive support to the communities in which they operate. All the water companies work with the police, local authorities, crime prevention groups and the 2 local media to raise awareness of doorstep crime .

In 2006 Three Valleys Water celebrated 25 years of support for WaterAid by welcoming the Regional Fundraising Manager to work out of their offices in Hatfield. Total income raised within this region over the past five years exceeds £1 million.

Sponsorship Three Valleys Water continued its support of Groundwork Hertfordshire and Groundwork Thames Valley. These are two of 50 Trusts in England, Wales and Northern Ireland, which work with partners in deprived areas to improve the quality of the local environment, the lives of local people and the profitability of local businesses.

In addition, Three Valleys Water again matched the amount raised by employees on sponsored monthly dress down days. Other fundraising events included the 21st annual Rickmansworth Road Run which is organised by company employees and the Samaritan’s Purse Christmas Shoebox Appeal. Staff also gave up their free time to man the company telephones for the BBC’s Children In Need appeal.

Three Valleys Water’s Finance Manager, Graham Weller, is actively involved with the Kisumu Children’s Trust in Kenya. This year he was delighted to receive a €30,000 grant from the Veolia Environnement Foundation to allow the charity to build new facilities for over 50 orphans.

Three Valleys Water also provided funding for an array of charity and community activities during the year, including the British Disabled Water Ski Association, Earthworks, and the Rickmansworth Canal Environment and Community Festival.

During the year Three Valleys Water launched a new sponsorship scheme, whereby each month each staff member can nominate a community project with which they have personal involvement to receive £200.

Employee volunteering Veolia Water UK companies actively encourage employees to become involved in local community initiatives, in the belief that there are benefits for both the community and employees. In this way, they contribute to a Veolia Environnement objective to foster social cohesion and sponsor good causes.

Folkestone & Dover Water

All three water companies are long-standing supporters of the charity WaterAid, which funds projects in 15 of the poorest countries of the world to provide clean drinking water, sanitation and hygiene education.

Folkestone & Dover Water’s fundraising events for WaterAid included a sponsored cricket tournament, recycling mobile phones and printer cartridges, and subscriptions to the payroll lottery. The company is a partner organisation to Partners for Water & Sanitation, a UK tri-sector partnership initiative (Government, civil society and private sector organisations) to assist developing countries, initially from Africa, to provide clean water and adequate sanitation.

Tendring Hundred Water Tendring Hundred Water raised money for WaterAid through its annual golf day, mobile phone recycling and a charity mountain challenge.

1 Meets a VE commitment to participate in the social development of communities where our facilities are based

The Kisumu Children’s Trust was set up to provide disadvantaged children with essential shelter, food and security, and to give them educational opportunities so they would have the best chance to support themselves and contribute to Kenyan society in later years. It has already helped a number of children gain qualifications in business, nursing and teaching. As the orphanage was in need of extensive repairs it was decided to build a new centre. Through Graham’s involvement an appeal was made to our parent group’s corporate sponsorship body, the Veolia Environnement Foundation. The award-winning Foundation was set up in 2004 to support projects sponsored by company employees in the areas of access to essential services, helping disadvantaged people to find employment, and environmental education and conservation. The Foundation awarded the Trust €30,000 (approx. £20,000) for the supply of safe drinking water, electricity and a wastewater system to the new premises.

2 The Veolia Water companies’ social and community initiatives are consistent with the UK Government’s Sustainable Development Framework indicator for active community participation

Veolia Water UK Plc Corporate Responsibility Report 2006

Consistent with UK Government’s Sustainable Development indicator for fear of crime

Veolia Water UK Plc Corporate Responsibility Report 2006

In the community Continued

Case study:

Learning about water

Looking for mini-beasts

Environment & Education Centre

Now in its eighth year, the Centre continues to promote water efficiency through its education programmes, with national curriculum-linked activities taking place both at the Centre and through an extensive outreach programme. These activities encourage children to be aware of using water wisely, and offer practical ways in which the children and their parents can be more water efficient. During the year some 190 schools visited the Centre. As the classroom is fully booked for most of the year increasingly staff make visits to schools. More than 21,000 children and adults at over 120 different schools took part in some of our water-based activities during the year. These visits take the form of Water Assemblies, delivering the water efficiency message to children and adults, and Water Days consisting of water-focused activities teaching children how to use water wisely. Staff from the Centre also helped 21 schools to audit their water usage, helping them to be more water efficient.

While water may be the recurring theme for the education programme, we are increasingly adding material on other environmental issues, such as reducing and recycling waste. The Centre remains a facility for ongoing research and development projects for use by the company. The Garden Trials test vegetable growth using different methods of irrigation, and the Lawns Project is researching the effect of gel crystals, at a variety of soil depths, on the quality of lawns. The day-to-day working of the Centre contributes to research into the use of water-saving technologies, including rainwater collection and dual flush toilets. During the year the Centre worked in partnership with the Hastoe Housing Association in Essex to produce a water efficient garden to demonstrate good practice, which the Housing Association will promote nationwide. Staff from the Centre take part in numerous road shows to spread water conservation messages.

Target

Through its strong links with local education authorities, Education Business Partnerships and environmental bodies our awards-winning Environment and Education Centre is able to enrich the educational experiences of schoolchildren and students.

Veolia Water UK companies have an ongoing target to develop programmes to support education.

Folkestone & Dover Water’s roadshow on water conservation

Schools programme Folkestone & Dover Water worked with the local community during the year to promote environmental education. The company again sponsored the annual Dover Plant Fair, now a major local event, providing the company with an excellent opportunity to engage with customers and promote water conservation. Proceeds from the fair go to the National Trust. Tendring Hundred Water’s community programme focussed on upgrading its Environment Centre to incorporate a ‘Bug Room’, continuing to run the Maths Trail for schoolchildren at Horsley Cross pumping station, and sponsorship of local cultural activities. Veolia Water UK Plc took part for the fourth year in a scheme aimed at raising levels of achievement in schools serving the most disadvantaged pupils by mobilising targeted support from London employers. VW UK plc employees helped children with their reading and maths at a local primary school situated on the edge of Westminster’s largest council estate. The school has a high proportion of pupils for whom English is an additional language, putting them at risk of social exclusion. Feedback from the school shows measurable progress in the children’s abilities and behaviour. Employees report they have learnt new skills, have a better understanding of the local community and its needs and experience personal satisfaction.

Charitable donations Charitable donations made by our companies in 2005 (for the calendar year ended 31 December) totalled £121,000, together with £12,000 of sponsorship . Three Valleys Water and Folkestone & Dover Water matched sums raised for charity by employees.

Water industry sustainability indicator for investment in communities

Veolia Water UK Plc Corporate Responsibility Report 2006

In the environment Our goal…to seek opportunities to reduce our consumption of natural resources by using alternatives where possible, and by optimising efficiency of use, whilst protecting and enhancing the environment . 1

The Environment Agency issued no caution letters or enforcement notices to Veolia Water companies during the year. There were no prosecutions for pollution.

The following sections examine in more detail action being taken to reduce environmental impact under each of the key components.

Catchment protection

Main environmental costs of water

The water resources balance is not just threatened by rising demand, droughts and climate change. If raw waters become polluted, they may become temporarily or permanently unavailable, reducing the amount of water available for use. Protecting the quality of raw waters, therefore, is a key part of sustainable water resources management. Our companies do not act alone in this. The Environment Agency has a role in monitoring and protecting the catchment and prosecuting those responsible for pollution offences.

Our environmental data measurement systems are maturing and the confidence we can place in the data is improving each year. For the sixth year we present a summary of the main resources used, the key discharges, waste products and releases to the environment for each cubic metre of water we deliver to our customers. Whilst this table is not a complete picture of the resources used, we believe it indicates the principal impacts. The increases in energy use and CO2 emissions are due to the requirements to treat water using increasingly complex processes.

Veolia Water Partnership continued to manage extensive catchment protection programmes on behalf of the water companies. Three Valleys Water also actively supported research programmes into groundwater quality trends.

The principal environmental costs of the water business To deliver 1 cubic metre = 1000 litres (1 tonne) of water to a customer:

1998-99

2005-06

kWh of energy (electricity, gas & heating oil) used

0.77

0.82

Cubic metres of water lost from our pipes in distribution

0.13

0.11

Cubic metres of water lost from customers’ pipes

0.07

0.06

kg of treatment wastes, excavates & aggregates generated - (of which) kg landfilled - (of which) kg recycled

1.01 0.8 0.21

1.03 0.56 0.47

kg of carbon dioxide emitted into the air

0.35

0.37

litres of fuel used in fleet vehicles

0.005

0.003

While single point pollution is closely monitored by regulators, an important issue for future catchment protection is the risk of diffuse pollution from a number of sources such as farmland fertilisers, nitrates and phosphates. We endeavour to control this through education, managing our landholdings efficiently and involvement in industry-wide initiatives. Protecting rivers Society's demand for water has to be met efficiently and economically; this is the function of the water companies, and they have statutory duties to that effect. This must be done at the same time as ensuring that there is enough water in the environment to maintain good quality rivers, lakes and wetlands. Following an investigation into low flows at the River Brett, Tendring Hundred Water constructed a pipeline during the year from a nearby borehole which will enable it to augment low flows. Three Valleys

Veolia Water Partnership has maintained its ongoing dialogue with the Environment Agency. This year Veolia Water Partnership provided information on groundwater levels, operation of low flow schemes, water quality, volumes abstracted. It also helped the Environment Agency to develop water resources models.

Water losses In line with a Veolia Environnement objective to control industrial water consumption, the companies again recorded the amount of water taken from the environment relative to water put into 2 supply . At Three Valleys Water, water lost during transport to and at treatment works amounted to 3.2% of the total abstracted. In our offices We have an ongoing target to reduce water consumption at all of our offices. Overall, the group companies achieved a level of 33 litres per employee in 2005/6 which represents a reduction of 23% on 43 litres per employee in 1999/2000.

Energy consumption Greenhouse gases The annual carbon dioxide emissions associated with all our energy requirements for water supply, offices and transport were 105,400 tonnes, which is a 28% fall, or 41,300 tonne reduction since 1995/96. This fall is associated with changes in the mix of fuels used to 3 generate electricity supplied through the public electricity network .

2 Consistent with the UK Government’s Sustainable Development Framework indicator for resource use

Water continued to operate similar schemes on a number of rivers in their area at risk from low flows, pumping 327 Megalitres of water during the year.

Meets a VE commitment to protect the environment, conserve resources and reduce pollution

Veolia Water UK Plc Corporate Responsibility Report 2006

Water industry sustainability indicator for river water quality

3 Relates to the UK Government’s Sustainable Development indicator for water resource use

Relates to the UK Government’s Sustainable Development Framework indicator for greenhouse gas emissions

Veolia Water UK Plc Corporate Responsibility Report 2006

In the environment Continued

Three Valleys Water’s field technology

Target

All three companies have an ongoing target to maintain improvements in fuel consumption.

OLD 1.2 Energy consumption in the supply of water Pumping water from underground and surface sources, treating it and distributing it around the network uses large amounts of electricity, which is mainly generated from fossil fuels. Energy therefore represents a major cost to our businesses (coming second only to staff costs) and to the environment. As well as being a Veolia Environnement target, it is in the companies’ interest to make every effort to economise energy use, especially as they are subject to the full rigour of the Climate Change Levy. Despite our best efforts however to use energy efficiently, usage is dependent on climatic conditions, customer demand and operational requirements, including regulatory requirements. For these reasons we have to date not been able to define a realistic quantitative target for reduction of carbon dioxide emissions. We do, however, seek to ensure that we maximise supply of electricity from renewable sources.

We also measure our consumption in offices and seek ways to reduce energy use where cost-effective to do so. At Folkestone & Dover Water, a rolling energy review identifies energy savings and promotes best practice in energy reduction.

8 During the year, the Green Teams at Three Valleys Water and VWP, 7 6

made up of volunteer staff, continued to encourage colleagues to reduce waste and water and energy usage. Folkestone & Dover Water took part in Green Week with the slogan ‘Get to grips with climate change.’

Transport and travel

1.0

Fuel consumption Veolia Environnement has an objective to promote the use of cleaner fuels and vehicles .

0.8

Three Valleys Water has a programme of active maintenance and Following on its policy decision in 2001 to replace all vehicles on routine replacement of fleet vehicles with vehicles which meet the renewal with those powered by LPG, Tendring Hundred Water now latest emission levels. During the year the company developed new 0.4 95/96 96/97which 97/98 00/01 01/02 02/03 03/04and 04/05 has 11 out of 26 vehicles running on dual fuel. Ultra-low sulphur software will98/99 allow it99/00 to understand the fuel efficiency 6 diesel and LPG (liquefied petroleum gas) make up approximately mileage run of its vehicles, for comparison with best practice. This will be introduced during 2006. 95% of the fuel consumed.

0.6

5 4 00/01 01/02 02/03 03/04 04/05

Energy consumption in water supply: Kilowatt hours/megalitre (net of imports) /metre water pumped

The water companies have secured all their electricity from renewable sources which represents a 2% saving on their Climate Change Levy costs. Energy consumption per unit of water put into supply has increased over the past five years. This can be attributed to the use of different water sources (water lying deeper in an aquifer requires more energy to pump it to the surface), and to an increased number of membrane plants, as a result of the need to treat to ever higher standards. The main effort to reduce energy consumption will continue to be focused on water treatment and pumping because this accounts for 98% of electricity used by the companies.

Key Folkestone & Dover Water Tendring Hundred Water Three Valleys Water

The company also introduced driver skills assessment during the year for all staff who drive on company business. The assessment includes smoothness of driving and vehicle/driver empathy which aids efficient fuel use. The programme will be extended in 2006 to include defensive driver training.

Fuel consumption by fleet vehicles Annual consumption (litres) by fleet vehicles per property connected Key Folkestone & Dover Water Tendring Hundred Water Three Valleys Water

1.2

1.0 7

0.8

Travelling at work… All the water companies and Veolia Water Partnership have introduced tele- and video conferencing in order to reduce the amount of time and energy spent in travelling to inter-company meetings. Three Valleys Water estimate this saved 49,500 km travel in the year, Folkestone & Dover Water saved 5,750 km, which included car sharing, and Tendring Hundred Water 415 km . Both Three Valleys Water and Folkestone & Dover Water can demonstrate a general downward trend in fuel consumption per property connected since 1995/96. In the case of Three Valleys Water, the transfer of work to contractors is thought to be a contributing factor. At Folkestone & Dover Water, the reduction has been achieved by the use of route planning technology in a number of its vehicles and raising staff awareness of the need to reduce fuel use.

To increase the energy efficiency of pump motors, all three water companies have a phased inspection and replacement programme and install variable speed pumps where possible.

0.6

0.4 01/02

02/03

03/04

04/05

05/06

95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06

6 Water industry sustainability indicators on total energy use and percentage from renewable sources

Veolia Water UK Plc Corporate Responsibility Report 2006

Consistent with the UK Government’s Sustainable Development indicators for road transport, and air quality and health

LPG produces between 30 and 90% less carbon monoxide and 50% fewer pollutants than petrol

Water industry sustainability indicator on management of materials from excavations (diversion from landfill)

Veolia Water UK Plc Corporate Responsibility Report 2006

In the environment Continued Generation and consumption of aggregate material in streetworks Annual generation and consumption (tonnes) Folkestone & Dover Water Excavated & landfilled Excavated & reused Infill material purchased

Three Valleys Water Excavated & landfilled Excavated & reused Infill material purchased

Tendring Hundred Water Excavated & landfilled Excavated & reused Infill material purchased

Note: Waste figures include some estimation

Aggregate use and recycling in streetworks We are able to monitor the use of aggregates by measuring our own purchases and increasingly by contractually obliging and encouraging our streetworks contractors to record the amounts they use, re-cycle and dispose of. In 2005-06, we estimate that of 7 the 283,500 tonnes of material excavated by our companies and contractors, 52% or 122,700 tonnes were recycled rather than their 1 1 being sent to landfill , compared to 128,660 tonnes last year.

Target

Waste

All Veolia Water UK companies have an ongoing target to reduce waste going to landfill.

Respecting our surroundings

Major capital schemes are planned and managed on behalf of the four water companies by Veolia Water Partnership. Each scheme is carefully designed and planned from the outset, with an objective of 2 minimising disturbance to local residents and to the environment . This is consistent with Veolia Environnement’s objective to curb local nuisance by enhancing quality of life and ensuring installations are integrated within the local landscape.

Biodiversity VWP’s contracts to maintain the distribution network include provisions to encourage the use of trenchless technology and the re-use of excavated material. Waste production and disposal in water treatment Water treatment wastes are variable, depending predominantly on the quality of raw waters and treatment processes that are used. They may contain river solids, filtrates or sludges from treatment. All the treatment wastes generated during the year (11,800 tonnes) 1 2 were re-used as a soil conditioner on agricultural land .

Folkestone & Dover Water’s purchasing policy maximises the purchase of materials that can be recycled. The company recycles stationery, plastic piping, vending machine cups, mobile phones and printer cartridges. Tendring Hundred Water recycles paper, cardboard, mobile phones and printer cartridges. All paper purchased for office use comes from a sustainable source.

Office waste Across the group we used 19 tonnes of photocopying paper in main offices, and 117 tonnes of all other paper. This was mainly used for billing and marketing purposes. Of this amount, 99% came from sustainable sources.

1 Water industry sustainability indicator on management of materials from excavations (diversion from landfill)

1 These figures are to be treated with caution as they are based on a limited data set

Moving away from disposal of waste towards waste reduction, reuse, recycling and recovery is consistent with the UK Government’s Sustainable Development Framework Indicators for waste and resource use

Veolia Water UK Plc Corporate Responsibility Report 2006

Management of our landholdings The companies have for the fifth year recorded the amount of land owned which has a statutory designation, eg SSSI, SPA, SAC, including ancient woodlands and sites of high wildlife value. They have also recorded the percentage of this land which is subject to a management plan. This is to ensure efficient management of our landholdings. Folkestone & Dover Water continued to be a partner in the White Cliffs Countryside Project which works to enhance and protect the countryside in south east Kent. The company also supports Water for Wildlife, a Water UK and the Wildlife Trust project working to ensure wetlands habitats are protected for the future.

Volunteers from Three Valleys Water and VWP formed a ‘Green Team’ in 2003 in order to reduce the amount of waste generated by the two companies. Actions taken during the report year include 80% of plastic cups recycled, 8 tonnes of paper collected for recycling and 60 toner cartridges returned for re-use.

Our policy is to give particular priority to projects and activities that foster species and habitats which are the subject of Biodiversity Action Plans (see glossary) and are found on our own and adjacent 3 land . The tables show a selection of species and habitats that we are helping in this way.

Consistent with VE objective to increase the amount of waste recycled to agricultural use

2 Water industry sustainability indicator for sludge management (diversion from landfill)

2 Consistent with Veolia Environnement’s objective to curb local nuisance by enhancing quality of life and ensuring installations are integrated within the local landscape.

Tendring Hundred Water continued its sponsorship of the Essex Biodiversity project, a partnership of over 40 local organisations. In return, the project will look at ways of assisting the company with its biodiversity programme. The company continued to promote conservation through visits to schools and receiving schoolchildren at its nature area in Manningtree. The long-standing partnership between Three Valleys Water, Friends of Stockers Lake and Herts and Middlesex Wildlife Trust is an excellent example of business and the community working together. The partnership has succeeded in providing an outstanding conservation site at Stockers Lake to help maintain 4 the wetland bird population . Another partnership between Three Valleys Water, Groundwork Thames Valley and English Nature continued its scrub clearing work during the year at Wraysbury Site of Special Scientific Interest (SSSI), providing a range of habitats for wildlife. Three Valleys Water carried out a site specific biodiversity survey at 12 sites on company holdings during the year. The surveys will help to develop site specific habitat management plans to improve heterogeneous habitats within each site. They form part of a company-wide draft biodiversity strategy. Once the strategy is adopted additional sites will be surveyed and where appropriate plans to enhance biodiversity developed.

3 Consistent with UK Government’s Sustainable Development indicator for local environment quality

4 Relates to the UK Government’s Sustainable Development indicator for biodiversity conservation

Relates to the UK Government’s Sustainable Development indicator for biodiversity conservation

Veolia Water UK Plc Corporate Responsibility Report 2006

In the environment Continued

Grey heron

Barn owls

Priority Species

Nest boxes for barn owls

Priority Habitats

Folkestone & Dover Water

Dormouse, Silver-spotted Skipper, Chalkhill Blue, Adonis Blue, Great Crested Newt

Folkestone & Dover Water

Chalk grassland, woodlands, Dungeness shingle

Tendring Hundred Water

Water Vole, Dormouse, Stag Beetle, Great Crested Newt, Skylark, Song Thrush, Pipistrelle Bat

Three Valleys Water

Chalk rivers, grazing marsh, fen, lowland calcareous grassland, lowland dry acidic grassland, lowland heathland, reedbeds

Three Valleys Water

Barn Owl, Reed Bunting, Grasshopper Warbler, Water Vole, Otter, Pipistrelle Bat, Bittern, Great Crested Newt, White Clawed Crayfish, Black Throated Grebe

Veolia Water UK engaged Det Norske Veritas (DNV) to provide assurance on the environmental and social indicators prepared by Veolia Water UK covering the period April 2005 – March 2006 in its Corporate Responsibility Report. DNV’s terms of reference were to assess the appropriateness and accuracy of the data, claims and commitments made by Veolia Water UK against each of the indicators and to ensure that the information provided is representative. Process This is the sixth year that DNV has verified Veolia Water UK’s environmental and social indicators on a site-level basis. The verification process involved: 1.

Conducting visits to the water companies within Veolia Water UK.

2. Reviewing each company’s environmental and social indicators and the accurate transfer of this data to the Veolia Water UK Corporate Responsibility Report 2005-06.

Further information Do you want more information about our business and biodiversity? Each water company prepares its own report on its policies, plans and performance relating to conservation, access and recreation within their supply areas. These are included in the water companies’ annual Corporate Responsibility reports which give more detail on matters discussed in this Group report.

Findings DNV commends Veolia Water UK for the progress it continues to make with respect to the accuracy and completeness of the data reported and the robustness of the reporting mechanisms used against each of the indicators. To build on Veolia Water UK’s development of good practice, a number of recommendations to strengthen its environmental and social indicators as well as the reporting process are suggested:

• Veolia Water UK has recycling practices in place with regards to solid waste generation, but these good practices are not adopted by all of Veolia Water UK’s waste contractors. It is recommended that Veolia Water UK are more consistent in the application of their contracts. • DNV notes that Veolia Water UK continues to positively engage with its key stakeholder groups. DNV considers that this could be enhanced further by implementing a more structured approach to stakeholder engagement.

Conclusion Overall, it is DNV’s opinion that the information reported against each of the environmental and social indicators at the constituent company/site-level provides a credible and fair reflection of the way Veolia Water UK has addressed and managed these indicators during 2005-06.

Dr. Eric Pape Director DNV London November 2006

• The vast majority of energy used by Veolia Water UK is as a result of water pumps. DNV recommend that in future reports, further detail is provided concerning the effectiveness of the measures taken to reduce energy consumption.

Veolia Water UK Plc Corporate Responsibility Report 2006

Glossary

Abstraction licence The authorisation granted by the Environment Agency to allow the removal of water from a source of supply Aquifer A porous water-bearing underground formation of permeable rock, sand or gravel capable of yielding significant quantities of water Business in the Community Business in the Community is a business-led charity comprising over 750 companies. Its purpose is to inspire, challenge, engage and support business in continually improving its positive impact on society. In 2002 it developed the Corporate Responsibility Index, a voluntary benchmark of responsible business practice Business in the Environment An organisation set up in 1989 as an initiative of Business in the Community. It promotes practical steps that will support the UK’s progress towards understanding and applying the principles of sustainable development through action and partnership between business and its stakeholders. It has developed the Index of Corporate Environmental Engagement, which gauges how businesses manage environmental issues Biodiversity The variety of life forms we see around us. Encompasses the whole range of mammals, birds, reptiles, amphibians, fish, insects and other invertebrates, plants, fungi and micro-organisms such as protists, bacteria and viruses Biodiversity Action Plans Plans which set out proposals and targets for the conservation of priority species and priority habitats identified under the UK's National Biodiversity Action Plan Carbon dioxide The most important of the greenhouse gases. Carbon dioxide is produced when fuels are consumed (eg to generate electricity or to power a vehicle) Catchment protection activities Actions to reduce the risk that water from a catchment will be degraded (in quality or quantity) as a result of land-use change, pollution, etc.

Demand management Controlling or influencing the amount of water needed to meet the requirements of society. Demand management measures are hugely varied and can include controlling leakage, promoting the use of water-efficient appliances, charging for water on a measured basis ("metering"), encouraging water-efficient gardening techniques and promoting water recycling Distribution input Average daily flow from water treatment works into the water company’s distribution system. Also known as “water put into supply” Distribution losses The water loss from that part of the distribution system which is the responsibility of the water company. It is the difference between distribution input and water delivered (after allowing for operational uses such as flushing of mains following repair work) Drinking Water Inspectorate (DWI) A body formed by Government in 1990 which monitors water companies’ compliance with the Drinking Water Standards Drinking water standards The legal requirements governing the quality and the wholesomeness of drinking water Environment Agency A non-departmental public body with major responsibilities for the management and regulation of the water environment and for the control of industrial pollution and wastes Greenhouse gases Gases which, when present in the atmosphere, trap warmth from the sun and maintain the temperature of the earth Groundwater Water held in water-bearing rocks, in pores and fissures underground Headroom This is the difference between the amount of water a company has available for supply (‘water available for use’) under certain conditions, and the volume of water it is required to put into its network (‘distribution input’) under the same conditions

Kilowatt-hour (kWh) A unit of electricity. One Kilowatt-hour is the same as 1,000 watts of electricity used for one hour and is, for example, the amount of electricity used by a typical single bar electric fire in one hour Kilowatt-hours/Megalitre (net of imports)/metre head pumped A measure of the amount of energy used to treat and distribute water put into supply after allowing for water that is imported from other companies. It is a useful measure for comparing year-on-year performance and performance between different companies because it takes into account factors such as variation in gradients within the supply area and the depth of the water table Landfill The process of disposing of rubbish by placing it in the ground, either in specially-designed excavations or in old mineral workings that are adapted for the purpose Low-flow rivers Rivers which are identified by the Environment Agency as “having unacceptably low flows caused by authorised abstraction” Megalitres/day (Ml/d) Megalitres (1 million litres) per day. The usual method of measuring the consumption or the flow of water Meter penetration The installation of meters to measure the consumption of water Ofwat Office of Water Services. A body established by Parliament with legal duties to ensure that water and sewerage companies can carry out their functions, to protect customers, to promote efficiency and economy, to facilitate competition, and to further environmental conservation and enhancement Priority species Species which are of the highest priority for conservation action and for which a Biodiversity Action Plan (see above) is in place Security of supply index This index is designed to give information on a water company’s ability to supply customers in dry years without making demand restrictions such as hosepipe bans

Streetworks Work necessary to repair, renew or otherwise improve the distribution system which takes place on or near the public highway Supply pipe The length of service pipe from the boundary of the property to the curtilage of the building; this part of the service pipe is the responsibility of the householder Surface water Water which flows or is stored on the ground surface Sustainable development Development that meets the needs of the present without compromising the ability of future generations to meet their own needs Tonnes Metric measure of weight; equivalent to 0.98 tons Total leakage The total amount of water lost from the distribution system including "distribution losses" (see above) and losses from the customers’ part of the distribution system Treatment wastes Waste materials produced as a result of treating raw water to ensure that it is safe to drink and complies with the Drinking Water Standards (see above). Examples include coagulant sludges, sludges from iron removal plant and river silt Water available for use Reliable yield of water resources based on the quantity or yield of water that can be supplied continuously from developed resources. Calculated using guidelines issued by the Environment Agency, takes account of the characteristics of each source and its ability to support abstraction under drought conditions without detriment to the needs of other water users or the environment Water delivered Water delivered to the customer at the limit of the Water Company’s responsibility. (Water delivered will comprise water used by the customer, water lost due to internal plumbing losses and supply pipe losses)

Site of Special Scientific Interest (SSSI) An area of land designated under the Wildlife and Countryside Act 1981 as of special interest because of its flora, fauna, or geological or physiographical features

Veolia Water UK Plc Corporate Responsibility Report 2006

Invitation to comment

We would like to hear from anyone who has comments to make on our environmental, social and economic performance. Please contact Corporate Responsibility Services Veolia Water UK plc 37-41 Old Queen Street London SW1H 9JA Tel: 020-7393 2700, fax: 020-7393 2805 E-mail: info@veoliawater.co.uk or comment online at www.veoliawater.co.uk

Three Valleys Water PLC Folkestone & Dover Water Services Ltd

Tendring Hundred Water Services Ltd

Veolia Water Partnership

Veolia Water Industrial Outsourcing Ltd

PO Box 48,

The Cherry Garden

Mill Hill, Mistley

Blackwell House,

Bishops Rise,

Cherry Garden Lane

Manningtree, Essex

1 Three Valleys Way,

Hatfield

Folkestone CT19 4QB

CO11 2AZ

Bushey,

Bushey

Herts WD2 2QD

Herts AL10 9HL

Veolia Water UK Plc

37-41 Old Queen St London SW1H 9JA

Supply area

3738 km2

420 km2

352 km2

N/A

Properties connected

1,246,775

73,999

71,600

N/A

Number of people supplied

3,054,310

159,230

152,990

N/A

Water put into supply

872.7 Ml/day

45 Ml/day

30.2 Ml/day

N/A

58%/42%

100%

82%/18%

N/A

Length of main

14,385 km

1,087 km

909 km

N/A

Employees

868

136

Turnover

£206.4 m

£15.8 m

£14.3 m

£12.9 m

N/A

£238.512

Website

www.3valleys.co.uk

www.fdws.co.uk

www.thws.co.uk

www.vwio.com

www.veoliawater.co.uk

Percentage from groundwater/ surface water resources

Veolia Water UK Plc Corporate Responsibility Report 2006