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TCFD: Climate-related risks and opportunities - our approach

Here we summarise our evolving approach to assessing and managing climate-related risks and opportunities in line with the requirements of the Task Force on Climate-related Financial Disclosures (TCFD), and the action we are taking to develop our first full TCFD disclosure. The structure of this section is based on the TCFD recommendations framework.

Governance

Board oversight of climate-related risks and opportunities.

The Serco Group plc Board has ultimate responsibility for our environmental agenda, which includes climate change. This is exercised through the Board’s standing committee, the Corporate Responsibility Committee (CRC), which provides formal review and oversight of environmental strategy and the delivery of agreed objectives and targets.

Our new Group Environmental Strategy 2020-30, which addresses climate-related risk and opportunity, has been endorsed by both the CRC and plc Board.

Role of management in assessing and managing climate-related risks and opportunities.

Our Group Chief Operating Officer is Group Executive Sponsor for Health, Safety and Environment (HSE). Our Group Director of HSE is responsible for HSE policy and strategy, supported by our Group Head of Environment, Energy and Sustainability.

We plan to complete a robust assessment of climate-related risks and opportunities by market and geography in 2021, building on assessments undertaken to date. Management from all regions will contribute, including Operations, Risk, Finance, HSE and Business Development. The results will be incorporated into existing structures of risk oversight and responsibility.

Strategy

Climate-related risks and opportunities identified over the short, medium and long term.

Climate-related risks and opportunities identified to date include the following examples, which we will add to, expand on and refine in 2021.

Short term (0-3 years): Regulation: enhanced reporting and carbon pricing mechanisms. Physical: increased severity and frequency of extreme weather events such as heatwaves, cyclones and floods; climate-linked wildfires.

Middle term (3-6 years): Technology: transition fleet away from fossil fuels. Reputational: more sustainable supply chain to influence client impacts.

Long term (6-25 years): Reputational: tangible contribution to low carbon transition more clearly articulated in Serco business strategy, market propositions and case studies. Physical: extreme weather risks escalating.

Impact of climate-related risks and opportunities on businesses, strategy and financial planning.

As an outsourcing organisation operating across multiple sectors and geographies, the ways in which climate change may impact our customers’ assets, where we deliver our services, and their requirements is hugely diverse. This presents numerous multi-dimensional risks and opportunities, of which we plan to consolidate the most material for full disclosure in the year ahead.

Our Group Environmental Strategy has been developed to address certain anticipated Group-wide impacts. These include, for example, policy to source green energy supplies, lower carbon vehicles and fleet; and plans for increasing carbon taxation, congestion charging and sequestration costs for unavoidable emissions.

We also plan to analyse carbon impacts throughout our value chain in more depth.

Resilience of strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario.

Our Group Environmental Strategy includes targets calculated using both 1.5°C and 2°C trajectories and modelled against a business-as-usual scenario. We plan to review other climate scenarios in 2021, granulating by market and geography to help ensure we are resilient across our global operations.

Risk management

Process for identifying and assessing climate-related risks.

Serco has traditionally employed a risk-based impact assessment methodology for quantifying environmental risks. Our Contracts are required to undertake environmental aspects and impacts assessment in line with ISO 14001, detailing significant outcomes in their risk register. Typical risks and opportunities have been identified at Group level. A more robust review, by market and geography, will be undertaken in 2021 and the results integrated into our Contract Lifecycle process.

Processes for managing climate-related risk.

Control measures are outlined in environmental aspects and impacts registers and risk registers, linked to the Serco Management System and/or client management systems. Contract and Business Unit targets are set to address risk, aligned to Divisional and Group strategy.

Integration of processes for identifying, assessing and managing climate-related risks into overall risk management.

Climate-related risks across Contracts are consolidated into Business Unit assessment and risk registers, which are then consolidated into a Divisional assessment. ‘Principal’ and ‘Emerging’ Risks are then identified at Group level, with oversight from the Group Risk Committee of the plc Board. Environmental and climate risks are addressed in our Group Emerging Risk Register at present.

Metrics and targets

Metrics used to assess climate-related risks and opportunities in line with strategy and risk management process.

We work to expand, evolve and refine the suite of metrics with which we assess environmental risks and performance every year. We have incorporated into our new Group Environmental Strategy metrics which align with Global Reporting Initiative (GRI) reporting disclosures and are mapped to UN Sustainable Development Goals. We plan to develop a more comprehensive data set in the years ahead. For example, current consideration is being given to:

  • proportion of low carbon vehicles in fleet;

  • proportion of electricity sourced from green tariffs; and

  • proportion of electricity self-generated.

Scope 1-3 greenhouse gas (GHG) emissions and related risks.

We disclose these in our annual CR Report (see CR performance and disclosure data). Material Scope 3 emissions remain our largest proportion, in particular purchased goods and services and capital goods. We continue to mature our Scope 3 reporting for greater precision.

Targets used to manage climate-related risks and opportunities.

Within our new Group Environmental Strategy we have developed Scope 1 and 2 targets that align with 2050 net zero ambitions and the Science Based Targets initiative, including a commitment to net zero in our own assets, leases and business travel by 2030. Scope 3 targets will be developed once our Scope 3 reporting has reached an appropriate level of maturity.

Our Scope 1 and 2 targets over the next decade are outlined below, representing absolute reductions against a 2019 baseline.

- 6%        2020

- 22%      2025

- 38%      2030