Section 172 (1) statement
In promoting the success of the company, the Directors must also consider the interests of stakeholders and the other matters required by section 172(1) (a) to (f) of the Companies Act 2006 ("the Act").
This Section 172 Statement describes how the Directors have considered wider stakeholders in their decision making and the principal decisions taken during the year.
Whilst BGIL is an independent subsidiary of Centrica plc, BGIL activity supports the broader strategy of British Gas and the Centrica Group ("the Group"). Where appropriate, for example, in matters of long-term strategy, decision making is aligned with that of the parent company Board, ensuring that BGIL stakeholders have been considered.
General confirmation of Directors' duties
Directors are fully aware of and understand their statutory duties under the Act. The Board has a clear framework for determining the matters within its remit and has approved Terms of Reference for the matters delegated to its Committees.
Day-to-day authority is delegated to executives, and the Directors engage with management in setting, approving and overseeing execution of the business strategy and related policies. Board meetings are held periodically where the Directors consider the company's activities and make decisions.
At Board meetings, the Directors review financial and operational performance, business strategy, key risks, stakeholder-related matters, governance, and legal and regulatory compliance. For example, the company's capital management policy and plan. This is done through the consideration and discussion of reports sent in advance of each Board meeting and through presentations to the Board. When making decisions, each Director ensures that they act in the way they consider, in good faith, would most likely promote the company's success for the benefit of its members as a whole, and in doing so have regard (among other matters) to section 172(1) (a) to (f) as described below.
(a) The likely consequences of any decision in the long term
The Directors understand BGIL's business and the evolving environment it operates in, including the challenges of a highly competitive marketplace, regulatory intervention and climate change.
The Directors recognise how different stakeholders view our operations and that some decisions may not align with all stakeholder interests. The Directors took decisions during 2021 that they believed would best promote Centrica's long-term success for the benefit of its stakeholders as a whole. For instance, the Board had oversight of significant British Gas restructuring (where it applied to BGIL and British Gas Services Limited ("BGSL") ), which was aimed at creating a simpler, leaner business focused on delivery for customers, and agreed with the appointment of new regulatory role holders under the Solvency II regime. Furthermore, in light of the uncertainty arising from the Covid-19 pandemic, the Directors sought additional assurance (including additional stress testing and scenario analysis) prior to payment of dividends, being mindful of enhanced regulatory guidance. Dividend decisions were made, taking into full consideration the need to ensure the long-term sustainability of the business for its customers and policyholders. Further reference to operations and regulatory relationships is included in the review of the business section below.
(b) The interests of the company's employees
Whilst BGIL has no direct employees, the Directors recognise that employees of intermediary BGSL are fundamental to the future growth and success of the company. That success depends on looking after our employees and having consideration for employees of our intermediary BGSL, including the application of the Group's diversity policy and strategy. The Board is mindful that decisions and oversight often have to balance the differing needs of stakeholders, for example, employee safety considerations during the Covid-19 pandemic including home working capability and making only essential visits to customers' homes, balanced against ensuring continued customer product value. The decisions taken by the Board were designed to prioritise and protect the health and safety of our employees and customers in the face of the global public health risk. In 2021, the Board was kept well informed during the negotiations to modernise BGSL employee terms and conditions and the ensuing industrial action which was resolved during 2021.
(c) The need to foster the company's business relationships with suppliers, customers and others
The Directors recognise the benefits of engaging with a broad range of stakeholders and developing and delivering our strategy depends on building and maintaining constructive relationships with them all. The Board's actions have ensured that, wherever possible, BGIL policyholders (customers) had heating and hot water, even at times of maximum restrictions, while the health and safety of both employees and customers remained a priority. Additionally, the business proactively remediated customers with payments in lieu of service visits when a visit could not be completed within the customers' contractual year.
Given the challenges presented by the Covid-19 pandemic, the Board requested that management assess the value for money that customers received during this period. With customers spending significantly more time at home than in previous years, the Board was satisfied that the relevance and security of products had increased. Pricing metrics, designed to track product value for money, also demonstrated a stable performance across the key metrics through 2021, including claims frequency and retention.
(d) The impact of the company's operations on the community and the environment
The Directors appreciate that collaboration with charities and community groups helps to create stronger communities and provides insights that enable the Board to understand BGIL's impact on the community and environment and the consequences of its decisions in the long term. For that reason, BGIL, through its intermediary BGSL, has given back to the community through the Trussell Trust in helping to meet the rapid rise in demand for food banks throughout the pandemic. Furthermore, in consideration of the community and its customer-centric ethos, BGIL supported the implementation of payment holidays of up to three months for customers in financial difficulty during the pandemic.
(e) The desirability of the company maintaining a reputation for high standards of business conduct
The Board considers Centrica Group's "Our Code" code of conduct when reviewing whistleblowing and conflicts of interest and through its fraud policies. All Group employees are subject to this code. In addition, our business strategy is underpinned by a conduct risk framework that seeks to put the customer at the heart of decision making. Together, these drive a clear commitment to continuous improvement in customer service levels, seeking to solve more effectively and efficiently for our customers.
(f) The need to act fairly as between members of the company
After weighing up all relevant factors, the Directors consider which course of action best promotes the company's long-term success, taking into consideration the impact on stakeholders. In doing so, the Directors act fairly as between the company's members. However, the Directors are not required to balance the company's interests with those of other stakeholders, and this can sometimes mean that certain stakeholder interests may not be fully aligned.