Centrica Investor Project case study: Aligning purpose with business strategy for sustainable growth

A decision to undertake a thorough strategic review at Centrica, underpinned by a desire to articulate the company's core purpose in society, enabled it to enter into much more meaningful dialogue with stakeholders, including investors.

Centrica logoReviewing Centrica's purpose

In February 2015, Centrica undertook a strategic review initiated by their new Chief Executive, Iain Conn. The review covered the long-term sustainability of their business - from sources of growth, portfolio mix and operating efficiency, to capital intensity and the financial framework in which they operate.

Our refreshed purpose articulates the need we serve in society. Entwining our purpose with strategy, will help us provide excellent customer service, become an employer of choice and be the good corporate citizen we strive to be, which are all indicators of our ability to deliver long-term sustainable results.

- Julia Rebholz,
Group Sustainability Director, Centrica
It involved Centrica's Executive Committee revisiting the company's roots in the 1812 Gas Light and Coke Company which was founded with the intent of bringing heat and light for the significant good of the people. 

Building on this foundation Centrica articulated a new purpose statement which framed itself as a customer-centric energy company for the 21st century:

“To provide energy and services to satisfy the changing needs of our customers.”

Practical outcomes from the strategic review included making a £1.2bn investment over five years to create new businesses, such as: Centrica's Connected Home business which aims to give customers greater choice and control over energy in their homes and businesses through innovative products and services that can also help reduce consumption and carbon emissions; and a Distributed Energy and Power business which aims to optimise energy relationships for business customers, improving energy efficiency, management systems and flexible generation as well as being an enabler of new technologies.

With this rearticulated purpose as a back-drop, Centrica was able to begin more meaningful dialogue with investors at its Interim Results in July.

Iain Conn, Centrica’s Chief Executive said: “The conclusion of our strategic review provides a clear direction for the business. Centrica is an energy and services company. Our purpose is to provide energy and services to satisfy the changing needs of our customers, and as such we will focus our growth ambitions on our customer-facing activities. Serving our customers is what we are known for, what we are good at and where we already have distinctive positions and capabilities.”

Centrica's response to the Investor Project

Centrica's involvement in the Investor Project and dialogue with investors in the BITC forum helped it recognise the significance of ratings and research provided by third party organisations and agencies to investors. As a result, the company is now engaging key research providers in an ongoing dialogue rather than one-off annual interactions. This helps ensure their interpretation of public reporting and analysis of the business is accurate.

Recommendations from Centrica

  • The first step in ensuring sustainable long-term business performance is having a clear purpose that flows into the strategy and core of the business. Having that clarity means Centrica’s communications are more meaningful to stakeholders.

  • The team noted that sustainability language can sometimes be confusing and unclear to investors. Centrica instead now talks about ‘How we do business’ and demonstrates how purpose drives sustainable business activities and balances material issues of concern to stakeholders.

  • Understanding the significance of ratings and research provided by third party organisations and agencies to investors is important. Centrica is now engaging key research providers in ongoing dialogue rather than one-off annual interactions.

Next steps

As a medium-term step, the Investor Relations and Sustainability teams will review the broader investor engagement strategy based on input from the BITC group discussions. They will work together to demonstrate the link between material issues, risk, growth, cost efficiency and what matters most to stakeholders. The reputation of the business will be measured on an annualised basis to assess the changing expectations of stakeholders, so the company ensures that it is responsive to their needs, integrating feedback into business activities.