Corporate Responsibility Report 2007

Materiality and Scope

Corporate Responsibility (CR) is a broad concept, integral to many aspects of how BG Group operates. In this Report we focus on CR policies and performance related to environmental, social and governance measures and risks that are material to BG Group's business and of significant interest to internal and external stakeholders.

Assessing materiality

BG Group utilises its main business risk management process to identify and assess CR risks. As with other business risks, assets and project management teams are required to review and register their key CR risks quarterly. High-impact risks are aggregated on a regional and Group basis to ensure that they are managed at the appropriate level.

Specialists within the Group supplement this bottom-up approach with functional risk assessments to identify and manage risks occurring in more than one location, which may indicate a systemic exposure, as well as risks that are not specific to any location.

To determine the degree of materiality, risks are assessed on the basis of likelihood and potential impact on the business and on stakeholders. Of the risk factors covered in the 2007 Annual Report and Accounts (ARA), the following are related to the issues covered in this Report:

• Health, Safety, Security and Environment (HSSE):

  a major HSSE incident could result in injury or loss of life, damage to the environment or destruction of facilities, each of which could have a material impact on BG Group. BG Group recognises that the protection of the health and safety of its employees, and others affected by its operations, is an essential element in delivering business performance, as are the security of physical and intellectual assets and the protection of the natural environment. Policies and measures at the international and national level to tackle climate change will increasingly affect business conditions, presenting environmental and regulatory risks. Similarly, measures to tackle loss of biodiversity may limit access to oil and gas resources in areas deemed to be biologically sensitive. The increased threats from international terrorism and violent crime could also interrupt the Group's operations to a material extent.

• Stakeholder engagement:

  a number of stakeholders (including employees, investors, media, governments, civil society groups, non-governmental organisations and those living in local communities affected by BG Group's operations) have legitimate interests in the Group's business. The Group's reputation and/or share price could suffer due to inappropriate or inadequate engagement with stakeholders, including, for example: failure to develop proactive stakeholder engagement strategies, delivery of inconsistent messaging to key stakeholders on business objectives and strategy; failure to provide adequate explanations if performance targets are not met or if performance is perceived as poor against competitors; and inadequate responses to any crisis (including financial market challenges, such as a hostile bid) or a major HSSE incident.

• Human resource and organisations:

  BG Group's performance and its ability to mitigate significant risks within its control depend on the skills and efforts of its employees and management teams. Future success will depend to a large extent on the Group's continued ability to attract, retain, motivate and organise its highly skilled and qualified personnel. This in turn will be impacted by competition for human resources. If the Group loses the services of key people or is unable to attract and retain employees with the right capabilities and experience, it could have an effect on the Group's business and operations. Effective organisation of the Group's human resources relies upon the development and delivery of an organisational design aligned to the Group's business objectives. Failure to effectively implement organisational design, or to adapt the organisation as the Group grows, could have a material adverse effect on the delivery of business objectives.

• Corporate Responsibility:

  BG Group defines CR as putting our Business Principles into practice. BG Group's failure to implement its Business Principles and/or any ongoing or damaging investigations of BG Group could impact the Group's reputation and/or share price. Each of the following risks could affect the Group's ability to deliver projects on time and within budget and damage BG Group's reputation: failure to consider and manage environmental impacts, social consequences and human rights in investment decisions, project planning and operational management; failure to identify stakeholder expectations; and weak governance and internal controls, including the ineffective implementation of anti-corruption policies.

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Policies and procedures described in this Report apply to BG Group and our wholly owned subsidiaries. We are working to encourage joint ventures, non-operated businesses in which we have an interest and contractors to adopt equivalent policies. Performance data covers operations over which we have effective management control. In the case of greenhouse gas emissions we also report BG Group equity share from operations in which we have a financial interest (see Social and environment data).

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