Southern Water Annual Report and Financial Statements 2022–23
How we operate
Our vision is to create a resilient water future for our customers in the South East.
Water is collected
Overlapping Goals
Clean water is put into supply
Customers enjoy our water
Wastewater is collected and treated
Customers are billed
Water is collected
About 67.2% of the water we supply comes from groundwater (water stored underground in aquifers), 28.4% is taken from rivers and 4.4% comes from our reservoirs.
Associated risk
In our densely populated and waterstressed region, we must balance the need to supply high-quality water to our customers with the need to preserve our natural resources, to help mitigate the risks posed by drought.
Water is cleaned
Our 75 water supply works treat raw water to the highest standards, making it safe to drink.
Associated risk
Failures at our treatment sites and across our network could result in a risk to public health due to reduced water quality and/or disruptions to supply. We use several chemicals in the treatment of water, which, if not handled correctly, could result in injuries to colleagues and/or customers. Area-specific risk assessments inform our monitoring programme, ensuring we are sampling for relevant substances to make sure we are treating water correctly.
Clean water is put into supply
Our 13,919 kilometre network, 232 service reservoirs and 655 pumping stations deliver a continuous supply of clean water to our customers at a regulated pressure level.
Associated risk
We regularly test water that we pump into customers’ homes and businesses to make sure it meets required standards. Our teams offer support on the installation of new pipework and notify customers when we find contaminants or lead pipes. We can experience increased leakage from our network and from customers’ homes and businesses reducing available supplies.
Customers enjoy our water
Customers across the South East go about their daily lives enabled by a supply of safe, clean drinking water and the removal of wastewater from their homes and businesses. In 2022–23, we put 566 million litres per day into supply.
Associated risk
If we do not constantly look to improve and maintain high levels of service and quality, we run the risk of not fulfilling our obligations to customers, to provide high-quality drinking water.
Wastewater is collected and treated
Our 39,973 kilometres of sewers and 3,499 pumping stations collect wastewater from our customers’ homes and businesses, and from the drains outside. Each day, 1,248 million litres of wastewater is received and cleaned at our 363 treatment works, meeting strict environmental standards before being returned to the environment.
Associated risk
If we do not remove wastewater effectively and manage our network, we may cause sewer flooding, environmental pollution and unnecessary distress to our customers. Varying rainfall patterns, extreme weather events and rising sea levels all contribute to an increased risk of flooding if our infrastructure is overwhelmed. This could also lead to contamination of water supplies and infiltration/ inundation of our sewers and sites.
Customers are billed
Our customer teams calculate and distribute customers’ bills, handle payments and manage any related account queries.
Associated risk
Errors in our billing calculations or customer information could lead to poor levels of customer satisfaction, and a rise in contact and complaints, which could damage the company’s reputation and increase operating costs. Failure to properly protect customer data could also lead to significant fines under Data Protection (GDPR) and Networks and Information Systems (NIS) directives.
Maintenance and development
We constantly monitor our sites and networks, carrying out maintenance and developing new assets and equipment to make sure they are meeting the standards set by our regulators. Failure to monitor, maintain and increase the capacity of our sites and networks could pose risks to public health, and result in disruptions to supply, injury to our employees or customers, and damage to property.
Ensuring future
supply
Climate change and population growth in the South East present very real challenges that initiatives like our Water for Life – Hampshire programme are looking to address through bulk water transfers with neighbouring water companies, water recycling projects and a host of other initiatives, all of which will be needed to secure reliable water supplies for the future. We are also working to reduce the amount of water lost through leaks on our network, and we are working with our customers to help them use less water.
Associated
risks
If we fail to plan properly and take account of factors such as the impact of climate change, we risk not being able to maintain supplies to our customers, which in turn can lead to financial penalties and reputational damage.
Living our purpose
Our purpose is why we exist. It drives our long and short-term decision making and is centred
around the value we provide to our customers and stakeholders.
What we do and where
We provide essential water services to 2.7 million customers, and wastewater services to more than 4.7 million customers
across Kent, Sussex, Hampshire and the Isle of Wight.
The external environment
The way we operate as a business is impacted by a number of external factors – social, political, environmental, economic, regulatory and technological – that we must consider and manage the impact of.
Environmental factors
Our natural environment is under pressure from population growth and climate change. We must continue to adapt and prepare to manage future impacts.
Economic environment
We are impacted by changes in financial markets, interest rates, inflation and other commodity prices, and we must manage these to reduce risk.
Regulatory environment
We must be responsive to regulatory requirements and prepare for future challenges.
Social environment
As a provider of essential services, we have a direct impact on our local communities. We must do all we can to support and understand our customers.
Innovation and technology
We are always improving our services, taking advantage of new technologies and innovations, wherever they come from.
Political environment
Decisions made by politicians and policymakers have the potential to impact our operations. We must follow any government directions, and adapt to policy developments.
Our key resources
For any business to be truly sustainable it needs to consider its impacts and dependencies, and this means going beyond tracking financial and operational measures to consider social and environmental resources and how they can affect our ability to create value over time.
Natural
Natural resources that we rely on, such as water.
People
Skills, capabilities and wellbeing of our employees and partners.
Financial
Financial health, including equity, debt and pensions.
Manufactured
Sites, equipment, networks and IT.
Social and relationship
Engagement, our reputation and the value we create for our communities.
Intellectual
Knowledge, systems, processes, procedures and the data we hold.
Underpinned by our risk and value process
Our risk and value (R&V) process improves our decision-making process, about how to invest, build and run our assets, and allows us to collaborate more effectively with our suppliers and partners. During the year, a number of environmental
considerations were added to this process to make sure we are considering the natural capital (the wider value of services provided by nature) and carbon values in our decisions, so we can make them based on best value.
This approach triggers conversations and thinking about alternative sustainable solutions and drives innovation and partnership working. It is already showing us its value in supporting nature-based wetland solutions for wastewater treatment.
How we do it
Our Water for Life Business Plan 2020–25 takes us one step closer to achieving our vision of a resilient water future for customers in the South East.
Developed following extensive consultation with our customers and stakeholders, over the five-year period it will deliver significant performance improvements, including a 15% reduction in leakage, improvements to 182.3 kilometres of rivers and a further 155,000 customers supported through financial assistance schemes, with bills reducing by 18% in real terms.
Who we deliver value for
The water cycle touches and enables every part of life, so our stakeholder base is diverse.
Customers and communities
The enviroment
Our people and partners
Regulators
Investors
Our planning horizons and strategy
Our approach to sustainability
We operate in an environmentally and socially conscious manner and uphold the highest standards of corporate governance. Behaving in a responsible manner, ‘Doing the Right Thing’ and ‘Working with Care’ are core values that inform our decision making at every level of the organisation.
Delivering value to our stakeholders
Water enables everything we do so we have a responsibility to meet the needs of a range of stakeholders.
Customers and communities
Our customers expect us to deliver wholesome water and effectively remove wastewater. They want us to deliver services sustainably, at affordable prices, while supporting customers who might become vulnerable due to circumstances.
Water for life is a shared responsibility, which means we must build partnerships in our communities with interest groups and local charities as well as future customers. Our employee volunteering programme helps us to connect with our communities.
How we measure value:
Customer experience (C-MeX).
Other metrics include value for money,
community engagement, developer
experience (D-MeX), complaints, vulnerability
support and financial assistance.
The environment
Our natural environment, including reservoirs, river catchments and bathing waters provide spaces for wildlife, recreation, and create value in terms of tourism. We work hard to protect and improve them, while delivering our essential services.
How we measure value:
Environmental Performance Assessment
(EPA), conducted by the Environment Agency.
Other metrics include leakage, greenhouse
gas emissions and natural capital value
added. Read more about our natural capital
accounts on page 31.
Our people and partners
We want to attract, develop and nurture an inclusive and diverse workforce, making sure we look after the health, safety and wellbeing of every colleague and partner. We invest in the region’s infrastructure, generating jobs, improving skills and helping to sustain the local economy through our capital construction programme. We work in partnership with our suppliers; ensuring transparency and fair treatment.
How we measure value:
Colleague engagement (Gallup); and Voice of
the Supply Chain (survey).
Other metrics include diversity and inclusion,
learning and development, injuries and near
misses.
Regulators
We have a number of regulators, and their priorities help define our business plans so we must constantly look to engage and influence them, where we can. Read more about our regulators on page 27.
How we measure value:
Ofwat Water Company Performance
Assessment; and EPA.
Regulatory price controls help to align
shareholder value with customer and
environmental priorities.
Investors
It is important that our investors have confidence in the company and how it is managed, so we provide regular updates on our performance and progress. This also includes environmental, social and governance (ESG) updates alongside financial and performance data.
How we measure value:
Return on regulated equity; outcome delivery
incentives; and GRESB.
The six capitals
Human
Intellectual
Social and Relationship
Manufactured
Financial
Natural