Economic Performance
A company’s main impact on society is economic and the primary focus of most companies is on delivering shareholder value, which is usually evaluated as a financial measure. Financial measures allocate a monetary value to transactions that pass through a company’s accounts, but do not extend to evaluating Carillion’s impact on society, the environment, the UK or other nations’ economies. Carillion is striving to understand and enhance its sustainability impacts because we see this as crucial to our developmentl. An evaluation of our sustainability impacts will alert us to potential risks as well as sustainable business opportunities. It is for this reason that we have included a section on our sustainability activities within our 2000 Annual Report and Accounts.
This section on economic performance recognises economics as a process not a product, and expands on our financial performance to start to evaluate our economic impact on society, the environment and the economy. An understanding of our economic impacts also highlights some of our key stakeholder relationships.
Economics
Economics is the process through which humans create social and environmental outcomes. Specifically economic activities are the means by which society transforms environmental resources (the ultimate source of all products) and people’s skills and knowledge, into the process of manufacture, distribution and consumption that enhance or detract from human welfare. Economics does not however value ‘externalities’ such as fresh air, pure water or the systems that clean pollution, such as trees or naturally occurring bacteria because the benefit is perceived to be free. We recognise it is critical that for earth’s life support systems to function for society to exist and for us to undertake business. It is for these reasons we report Carillion’s environmental and social impacts that are not captured in traditional accounting methods.
Financial Measures
Financial performance captures elements of Carillion’s economic performance, but does not extend to evaluate our impact on society and the environment. It is for this reason that we have identitied these aspects with this Environment, Community and Social Report. Carillion’s financial performance is presented in the Annual Report and Accounts.
Summary of Carillion’s Economic impacts
Carillion as a construction to services company constructs infrastructure and supports crucial public services. In that process Carillion employs staff, buys from suppliers, hires subcontractors, contributes to local and national economies, provides a return to lenders and dividends to shareholders and crucially is paid by customers and clients. The following outlines Carillion’s key economic impacts.
| 1. | Provision of infrastructure to support economic activity in a range of different sectors (industrial, distribution, financial, health, transport and public services). |
| 2. | Provision of Capital for Private Finance Initiative projects (arranged with other partner companies ad negotiated with lenders). |
| 3. | Distributed to employees via wages. |
| 4. | Distribution of Carillion’s turnover through the supply chain is a major economic impact. The organisations affected by our economic impacts are some of our direct stakeholders, people who impact our operations or those we affect. Our community investment is presented separately. |
| 5. | Investment of Carillion pension schemes. Pension funds represent a significant proportion of UK stock market and their investment decisions impacts on the corporate sector’s financial management decisions. |
| 6. | Socially responsible Investment
– Carillion operates a number of occupational pension schemes and currently delegates
the investment of the funds to Merrill Lynch, Barclays Global Investors (BGI), Phillips
& Drew & General and NPI. It is anticipated that two more will also be appointed
during 2001. All of the Carillion trustee bodies have delegated to their respective
investment managers the responsibility for taking social, ethical and environmental
considerations into account when assessing the financial potential and suitability of
investment. All the managers have developed their own policy on socially responsible
investment and the trustees have reviewed these in order that they can satisfy themselves
that delegation is appropriate. Although the primary aim of investment managers is to produce acceptable financial returns for their clients they recognise that they are in a strong position to influence businesses with regard to their attitude to the wider environment. |
| 7. | The government benefits from taxes paid. |
| 8. | UK plc benefits from increased intellectual capital from academic research grants, Carillion’s participation in business association, training of Carillion staff, subcontractors and suppliers as well as the cash distributed into community investment. |