Assurance

Independent Assurance Statement

Scope and objectives

United Utilities commissioned Csrnetwork to undertake an independent assurance engagement over the information and data within the online version and printed summary version of the United Utilities 2008 Stakeholder Report (‘the Report’). The objectives of the assurance process were to check claims and the systems for collection of data, and to review the arrangements for the management and reporting of sustainability issues. The assurance process was conducted in accordance with the AA1000 Assurance Standard, and we have commented on the Report against the principles of materiality, completeness and responsiveness.

International operations were not included within the scope of the assurance process, although some data from international operations were included in our review of corporate data collation. Regulatory data reported through the June Return were reviewed only at final collation stage; Csrnetwork did not repeat or assess the work of the Reporter appointed by United Utilities to check and report on the accuracy and confidence levels of the data submitted to the regulator. Any financial information contained within the Report is excluded from the scope of this assurance process, as are any links leading beyond the 2008 Stakeholder Report section of the United Utilities website.

Responsibilities of the directors of United Utilities and the assurance providers

The directors of United Utilities have sole responsibility for the preparation of the Report. In performing our assurance activities, our responsibility is to the management of United Utilities, however our statement represents our independent opinion and is intended to inform all United Utilities’ stakeholders including the management of United Utilities. We were not involved in the preparation of any part of the Report. We have no other contract with United Utilities. Csrnetwork previously acted as independent assurance provider for United Utilities CR Reports from 2000 to 2003, and the Directors of Csrnetwork provided the assurance for the 2004 CR Report through JustAssurance.

We adopt a balanced approach towards all United Utilities stakeholders and a Statement of Impartiality relating to our contract with United Utilities will be made available on request. The opinion expressed in this assurance statement should not be relied upon as the basis for any financial or investment decisions. The independent assurance team for this contract with United Utilities comprised Jon Woodhead, Louise Hawson, Rachell Evans and Anne Euler. Further information, including a statement of competencies relating to the team can be found at: www.csrnetwork.com

Basis of our opinion

Our work was designed to gather evidence on which to base our conclusions. We undertook the following activities:

• We conducted interviews with a small selection of directors and senior managers responsible for areas of management and stakeholder relationships covered by the Report. The objective of these discussions was to understand United Utilities’ governance arrangements and management priorities.
• We discussed United Utilities’ approach to stakeholder engagement with relevant managers, and reviewed the outputs of an internal review of stakeholder engagement carried out in 2007.
• We conducted a top level review of issues raised by external parties that could be relevant to United Utilities’ policies to provide a check on the appropriateness of statements made in the Report.
• Subject to the exclusions set out below under ‘Observations’, we reviewed data collated at the corporate level, and claims made in the Report. We undertook verification of specific data and claims through meetings with managers responsible for gathering data, reviewed their processes for gathering and ensuring the accuracy of data, and requested supporting evidence.
• The scope of our work included a visit to Davyhulme Wastewater Treatments Works in Manchester. Selected performance data at site and divisional level were reviewed as part of our review of consolidated corporate data.
• We undertook an assessment of the company’s reporting and management processes against the principles of materiality, completeness and responsiveness as described in the AA1000 Assurance Standard.

Observations:

Materiality – has United Utilities provided information on material issues to enable stakeholders to make informed judgments?

The Report includes reference to work undertaken during the year to review the company’s CR strategy and governance processes. This includes reference to issues which United Utilities has determined are of high significance to the business going forwards, in particular climate change, and attracting skilled employees to develop solutions to future challenges. The Report provides a good account of the company’s strategy, targets and performance in relation to climate change. There is less information provided on attracting skilled employees, in part because programmes in this area were still under development in the reporting period.

The Report does not make clear how stakeholder concerns have been taken into consideration in determining the issues identified as being of high significance to the business. It also does not make clear how stakeholder concerns and interests have been taken into account in determining which issues and indicators to report. This means that we cannot form a full assurance opinion on materiality in relation to this Report.

We make the following recommendations to promote improved reporting in future years:

• Future reports should demonstrate how the outcomes of stakeholder engagement have been used to align report contents with issues of concern or interest to stakeholders.
• The company’s views on which issues are of high significance to the business, and its reporting on these issues, should be reviewed with stakeholders, to ensure that the information reported enables stakeholders to make informed judgments.
• Future reports should provide further disclosure in relation to attraction and retention of skilled employees, as company programmes develop in this area.

Completeness – does United Utilities have systems in place to understand changes to stakeholder expectations and to provide complete and accurate information against the issues identified as material for inclusion in the Report?

United Utilities has a long track record of reporting in this area, over which time the company has undergone extensive organisational change. Data collection systems associated with regulatory reporting process are long established and clearly defined. Considerable effort has been made by United Utilities to provide data that is consistent and comparable with previous years. Internal processes for use of these data in the wider context of this Stakeholder Report, and the arrangements for collecting and commenting on other data, appear to be less robust. There is an opportunity to re-establish awareness across the organisation of the objectives and responsibilities associated with this Report, and to strengthen internal processes for generating complete and reliable information and data.

The establishment of the CR Panel and Community Investment Committee have strengthened CR governance arrangements and provided a forum for determining and overseeing delivery of CR strategy. As these new governance structures start to become embedded, the work of these committees should be informed by the outputs of stakeholder dialogue and regular reviews of consolidated performance data.

On the basis of the method and scope of work undertaken and the information provided to us by United Utilities:

• For environmental performance data, nothing came to our attention to suggest that these data have not been properly collated from information reported at divisional level. Data collection systems for environmental data are mature and appear to be producing complete and reliable data, particularly those associated with reporting for regulatory purposes.
• For health and safety performance data, following organisational change, company-wide data collection and collation arrangements are being re-established in line with those already in place for the Regulated Business. We can offer no assurance over consolidated corporate accident performance data, however we note that data for the Regulated Business are reported to the regulator as part of the June Return.
• For other social performance data, nothing came to our attention to suggest that these data have not been properly collated from information reported at divisional level.
  Case studies presented in the Report are relevant and provide examples of how United Utilities is addressing key issues. Future reports should provide a clearer statement of key short and long term targets, and analysis of performance and progress against them. We also recommend that additional commentary and data be made available to cover the broad range of sustainability indicators for the UK Water Industry, including those relating to resource use, vulnerable customers and carbon intensity of operations.

For clarity, future reporting would benefit from a section setting out the scope of reported data and text, in particular in relation to coverage of the non-regulated Group businesses such as UUOL, joint ventures such as 4D, and international divisions.

Responsiveness – how does United Utilities demonstrate that it has responded to stakeholder concerns?

There is evidence of engagement with a variety of stakeholders over the past year, covering many sustainability issues. Stakeholder groups are identified, and key engagement mechanisms are described, including the issues raised through these mechanisms. Future reports should explain in more detail how these stakeholder concerns are being integrated into strategy and decision making, for example through the new governance structure.

United Utilities has undergone significant organisational change during the reporting period, including review of many of the key policies and processes described in this Report. We recommend that United Utilities should now review its approach to reporting in light of these changes, including how the Report can best respond to stakeholder concerns. This should consider the Report structure, performance data reporting, and the link between hard copy and online reporting.

csrnetwork ltd
U.K. June 2008

Jon Woodhead - Director

Louise Hawson - Senior Consultant

Rachell Evans - Associate

                      

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