Corporate Responsibility Report 2007

BG Group Management Framework

CR is good business

BG Group believes that operating in accordance with our Business Principles is an essential prerequisite for outstanding performance that is sustainable over the long term. In our view, there is no trade-off between performance and principles: we believe that adhering to our principles leads to improved long-term growth.

Our approach to Corporate Responsibility (CR) helps us to identify risks, particularly in the form of external expectations and pressures, and to transform these risks into opportunities and competitive advantage. CR leads to more successful management of our business.

In all aspects of our operations, success depends on strong alignment with our stakeholders: governments, communities, partners, contractors, employees and customers as well as investors. We aim to deliver excellence in gas chain skills – discovering, producing, transporting and distributing gas – but we also have to understand our stakeholders' perspectives and priorities, and build businesses which reflect these. Our businesses are shaped by local and national requirements, both in producing countries and in our markets, and we seek to understand the impact of our presence on communities and wider societies.

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Long-term partnerships

Sustainable profits depend on working closely with stakeholders to achieve mutually beneficial goals, sharing benefits from the outset and over the long term. Our customers need secure and economic supply.

Governments need supply and revenue security. Communities need enduring benefits delivered through a reliable, trustworthy corporate presence. Companies and their partners and contractors need a predictable operating environment. Employees need safe working environments and career opportunities. All of these rely on long-term partnerships and require successful stakeholder alignment, consistent performance and, above all, a commitment to high standards of operation.

For many emerging nations, hydrocarbon revenues are driving long-term growth programmes designed to transform societies. Stable and enduring partnerships are critical to the delivery of these programmes. We also enhance quality of life directly through the provision of jobs, contracts or energy supply, and indirectly through improvements in infrastructure and health, or through building capacity.

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People

All industries face the challenge of attracting and retaining talented people. This is particularly the case in the oil and gas industry where there is a shortage of employees with key skills. CR can play a valuable role in meeting this challenge in the following ways:

• diversity – our aim is to recruit from the widest possible talent pool. BG Group's direct employees represent more than 65 different nationalities, maximising our opportunities to find tomorrow's leaders;
• motivation – our people want to work for a company that reflects values they share. Pride in the way the company works is an important element in motivation and retention; and
• recruitment – studies and experience demonstrate that a company's values have a major influence in attracting new employees. In a competitive market, a focus on the importance of CR helps attract leading talent.

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Risk management

We believe that our commitment to working in accordance with our Business Principles reduces risk and increases long-term value:

• good governance procedures help to prevent financial and management failures;
• a commitment to fairness, respect and personal development in our dealings with our employees supports our goal of a high-quality and highly motivated workforce;
• managing HSSE risks helps to protect our staff from harm, minimises the potential for environmental incidents and helps ensure the integrity of our assets; and
• stakeholder engagement with communities increases local support for our operations and minimises the risk of disruption.

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Financial returns

While there is no conclusive evidence that CR alone adds value, Goldman Sachs' GS Sustain focus list has incorporated Environmental, Social and Governance (ESG) performance with long-term industrial analysis and returns-based analysis to "pick companies that demonstrate sustainable and sustained competitive advantage by leading their peers across all indicators of corporate performance: management quality, industry structural themes and primary drivers and financial returns". These same companies outperformed the MSCI (an index of world stocks) by 25% between August 2005 and the report's publication in June 2007. Of these, 72% have outperformed their peers over the same period. The GS Sustain focus list has identified BG Group as an "energy leader" based on ESG, cash returns and industry structural themes (the key determinant for which in the energy sector is superior access to resources). More details on GS Sustain and BG Group's position within it can be found in the case study Goldman Sachs GS Sustain.

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How we do it

BG Group Internal Control Framework

See description

BG Group seeks to ensure that we operate responsibly through adherence to our Business Principles, 15 statements of core values and behaviours that define how the Company operates. For BG Group, CR means putting our Business Principles into practice.

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Organisation and structure

The Business Principles flow through the Group via the Internal Control Framework. This Framework is overseen by the Board of Directors, which is ultimately responsible to BG Group shareholders. The Corporate Responsibility Committee (CRC), a committee of the Board, has oversight of the Group's CR strategy, policy and risk exposure.

Implementation of our Business Principles is led by the Group Executive Committee (GEC) with support from three of the GEC subcommittees:

• the Governance and Risk Committee, responsible for Business Principles' annual review, overseeing compliance and implementation guidance;
• the People and Organisation Committee; and
• the HSSE Committee.

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Internal Control Framework

The Internal Control Framework provides the rules and guidance within which the Group operates, and is illustrated above.

Our Business Principles define how the Company operates. They are the overriding element of this Framework. Each Business Principle statement is underpinned by Policies, Standards, Processes and Guidelines, defined as follows:

• Policies – statements that govern the course of action that must be followed to deliver activities;
• Standards – statements containing precise criteria to be used as rules;
• Guidelines – recommendations and suggestions to assist with the implementation of Policies and Standards; and
• Processes – unified and logical structures for organising activities.

Functions responsible for specific Policies, Standards, Guidelines and Processes are also responsible for ensuring the Group's alignment with the related Business Principles statements. For example, the HSSE-related Business Principles are the responsibility of the HSSE department, which revised its Policies and Standards in 2007 to tighten alignment with the Business Principles.

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