During the 1990s, many major companies sought to refocus their community affairs activities in line with the ‘business case’. For most, that meant retro-fitting links to business objectives into a previously philanthropic programme; few had the opportunity to construct an entire programme afresh. Centrica is one of them.
Historically, in its days as a nationalised industry, British Gas had a strong public service ethos. Post-privatisation, customer service was the focus, but with a large community affairs programme in the traditional model 1980s model – large donations, mainly from corporate centre, to deserving causes. Today, although much reduced in scale, community activities are a model of integration with business objectives.
The business
Centrica is the still unfamiliar group name for the new company formed in February 1997 from the separation of British Gas plc into two businesses: part became BG plc which runs the national gas pipeline network, operating as Transco, and continues with exploration and international growth; Centrica became the domestic supply and sales business, still known to its 18 million customers as British Gas, its trading name. This business has three main elements:
British Gas Trading, the largest by sales, supplies energy to domestic and business customers and employs some 5,400 people;
British Gas Services installs and maintains domestic heating systems and employs the most number of staff in the group, some 8,300, mainly engineers;
British Gas Energy Centres is the high street retailer with 240 appliance shops and 1,800 staff.
Centrica is repositioning itself as a total energy supplier, providing electricity as well as gas, and diversifying into other services, such as home security, insurance and financial services, notably the Goldfish brand credit card, which has 750,000 customers.
The dynamic behind the demerger was profound restructuring in the UK energy market, driven by competition and pressure on margins, first for commercial gas contracts, then for domestic gas supply and soon for domestic electricity supply too. The days when British Gas as a privately owned national monopoly made ?1.5 billion profits and donated £10 million to the community, as it did in 1991, are long over. Then British Gas employed 85,000 people; now the combined workforce of Centrica and BG is 35,000.
In 1997, Centrica made an overall operating profit before tax of £212 million, but exceptional charges from the restructuring, windfall tax and exiting from uneconomic contracts, costing over £800 million, meant the business only retained a small post-tax profit. No dividend is being paid to shareholders, as the company made clear at demerger. While domestic gas sales are still profitable, despite the loss of around a quarter of customers in regions where full competition applies, the business sales, appliance servicing and the retail divisions are all making losses, albeit reducing. The industry restructuring exposed previously hidden cross-subsidisation. Among stakeholders, customers have certainly benefited, with domestic price cuts of around a quarter; staff and shareholders less obviously so. How has the community stakeholder fared?
Community programme
A substantial programme has been maintained, despite the business difficulties: in 1997, the community contribution was ?1.75 million, when the loss after exceptionals was ?791 million. Based on underlying profit before tax and exceptionals, this is equivalent to nearly 1%, and more if the full London Benchmarking Group valuation is applied. Over three quarters of the programme is classified as a community investment, being long term strategic activities on business related issues.
Activities are focused on five main themes, all linked to business objectives:
practical assistance to older people and people with disabilities;
education of young people about responsible use of products and services;
job creation and training, especially for young people;
promoting safe and energy efficient use of products;
encouraging and supporting staff to get involved in their local communities.
National flagship programmes have been developed in partnership with leading voluntary organisations, with examples given below. One common link back to the business is customer care, particularly trying to help those with special needs.
Through Other Eyes is a programme of ‘ sensory workshops’ with Age Concern to allow people working in retail environments to experience the kind of day-to-day problems older people face – goggles, ear plugs, arm bands and leg weights simulate some of the health problems they experience. Launched at this year’s Ideal Home Exhibition, the programme is being used to train staff in the Energy Centres so they can understand the difficulties older customers may have with cooking and other domestic appliances.
Powersavers is an energy efficiency competition and teaching programme for 7 to 14 year olds in primary and secondary schools, run with the Energy Savings Trust. Teaching materials linked to the national curriculum use practical projects within the school both to educate and to save money on energy costs. The best projects in each region and nationally are eligible for cash awards for the school and small prizes for the pupils themselves.
Disability in Business was a helpline, run in partnership with three charities but actually based in a British Gas telephone call centre, to advise small and medium sized businesses on best practice in customer service and employment policies. Free information packs, practical advice and a series of promotional events have helped over 2,000 firms to understand the Disability Discrimination Act. This has now been followed up with an awards scheme.
Handy Person Scheme, run with 15 local Age Concern groups, offers volunteers to older people on low incomes needing minor repairs done around the house.
In addition, Centrica has become involved with the present government’s welfare-to-work New Deal: a pilot programme in the north west, for example, is offering 50 jobs with training to disabled people and carers, while in Edinburgh more than 100 unemployed people have been recruited for a variety of customer service and administrative positions.
Organisation
Community affairs is managed as part of the 15 strong corporate affairs team at the centre, led by Simon Lewis, director of corporate affairs and customer service, who reports directly to the chief executive, Roy Gardner. Ian Coldwell is the programme manager, running the budget for national activities and employee involvement.
Down the line, six area communication managers in British Gas Trading have a share in the devolved budget of around £500,000 for local community relations. Tight coordination is maintained, with projects needing to be cleared centrally. As competition increases for gas and soon electricity sales, the positioning of British Gas as a secure and dependable brand regionally will be increasingly important. Corporate reputation suffered in 1996 particularly from perceptions of poor customer service to telephone callers. Recent evaluation shows that over half of positive local and regional media coverage is now focused on community relations.
Centrica is also relaunching its matched fundraising programme to encourage employee community involvement. A pilot programme being launched in April for the Leeds area will match funds raised and provide small grants for the use of school governors and those on the committees of voluntary organisations.
Changing business
With the energy supply market in such a state of dynamic change, the first priority for a business-centred community affairs programme is to stay relevant. For Centrica, this means staying on top of emerging issues, such as responsible selling door-to-door, and of the context of new business strands, such as financial services.
Likewise, a business-centred programme needs to keep pace with the changing public policy agenda, driven by the new government’s priorities, particularly as large parts of the business are still highly regulated. Companies with well developed social and environmental programmes should benefit if the industry regulators add these factors to traditional concerns about pricing and customer service. But ironically, one danger is that activities previously undertaken as a voluntary community contribution come to be seen as mandatory part of business basics.
Internally, the main challenge for the community programme is staff involvement. The scale of recent changes and the need to focus on the basic health of the business, has inevitably constrained activity. In expanding the level of involvement, one objective is to find ways linking back to the business, such as school mentoring helping to develop individual members of staff. Centrica’s chief executive, Roy Gardner, has just become president of the Carers National Association. As well as leading from the top, this is supporting the development of employment policies more responsive to the needs of staff carers.
A critical challenge for the future is how to address commercial objectives through cause-related marketing. Full use of the 18 million strong customer data base is constrained by the Data Protection legislation, but some possibilities are already apparent: one opportunity is using the quarterly bill mailings to provide information about partner organisations. Another is linking with charities through affinity marketing arrangements
In meeting the challenges of the more competitive energy markets, it is clear that the community programme can play an important role. For a new company with a long public service tradition, Centrica is centre-stage in redefining how a business generates private profits in a socially responsible way.
Corporate Citizenship Briefing, issue no: 39 – April, 1998
COMMENTS