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Performance Share Plan (PSP) Progress against SSE’s 2030 Goals, which are outlined on page 7, are linked to the Performance Share Plan (PSP), which will vests for the first time in 2025. The measures and targets used to measure performance are outlined in Table 5. These • performance against the 2030 Goals is now linked to the longer-term Performance Share Plan.
• average performance across three independent external ESG ratings, now being linked to the Annual Incentive Performance.
Overall, the link between sustainability performance and Executive remuneration has been strengthened.
Annual Incentive Plan (AIP) The updated sustainability measures in the Annual Incentive Plan include average measures are worth 15% of the overall award. In 2022, SSE’s Shareholders also approved new ‘strategic’ measures which assess progress towards the successful delivery of SSE’s capital investment plan. This means that 30% of the shares awarded under the new PSP are linked percentile performance across three key ESG ratings, linked to 10% of the AIP award. These measures and the outcomes for 2022/23 are outlined in Table 4, with performance at the median deemed the threshold and performance at the upper quintile, or above, the maximum. Performance across these ESG ratings in 2022/23 was strong, with upper quintile ranking achieved across all indices. In addition to the new sustainability measures, operational measures based on People and Customers ensure a strong focus on sustainability in the AIP.
to sustainability, either directly through sustainability measures or through strategic measures by virtue of SSE’s NZAP Plus.
Outcomes will be reported in 2025 at the end of the current three-year measurement period.
92 SSE plc Sustainability Report 2023 SSE plc Sustainability Report 2023 93.
Table 4: Sustainability measures and outcome for the 2022/23 AIP award.
Table 5: Sustainability measures and targets for the 2023 PSP award 173 SSE plc Annual Report 2023.
Renewables Cost per MW hour, plant availability, progress on renewables pipeline.
Production down by c.15% on plan due to weather. Plant availability at highest levels across onshore sites and improvements across offshore. 4GW of secured pipeline added. Total pipeline is now >20GW. 2nd in the balancing market.
3+ 65%
Distribution Progress against ED2 business plan; incentive income against agreed target.
Good progress against ED2 business plan. SHEPD and SEPD both performing well following change activity. SSEN Distribution the most improved DNO of the year. Some good performance against incentive measures.
3+ 65%
Transmission Contract awards achieved against agreed plan; delivery of outputs and approval of projects that maintain a trajectory of RAV greater than £6bn by 2026.
All T2 outputs are on track to be met. Delivery of outputs are expected to outperform despite challenging market conditions. Trajectory of RAV expected to be >£6bn.
4+ 90%
Thermal Balancing market performance. Rank 1 generator in the balancing market. 5 100%
Customer Finish above median in the Citizen’s Advice non-domestic supplier league table.
Ranking in Citizen’s Advice league around upper quartile performance level. Airtricity ranked 3rd out of 7 in annual CX survey but showed largest year-on-year improvement.
3+ 65%
Other Growth and Transactions.
Progress building pipeline across business areas including solar, storage, hydrogen, and other priority business development areas; progress made on financial sell down of T&D businesses.
Solar and battery pipeline increased to 2GW+ incl 22 long-term/greenfield projects up to 500MW each. Progress in Distributed Energy. Delivery of first EV hub in Glasgow. Transmission stake sale complete. Decision to retain 100% of Distribution at this time.
4+ 85%
Total 79%
High-level measure Detailed measure Factors taken into account in index scoring Assessment Outcome (% of max)
Sustainability 10%
Moody’s ESG rating (formerly V.E.)
Environment; Human Resources; Human Rights; Community Involvement; Business Behaviour; Corporate Governance. Peer group: Electric & Gas Utilities.
Upper quintile (Sep 2022)
Sustainalytics sustainability index.
Carbon – own operations; Emissions, Effluents and Waste; Resource Use; Land Use and Biodiversity; Business Ethics; Corporate Governance; Product Governance; Community Relations; Human Capital; Occupational Health and Safety. Peer group: Electric Utilities.
Upper quintile (Nov 2022)
S&P Global sustainability index 27 different categories which cover all of the above and also additional issues such as Policy Influence, Information and Cyber Security, Talent Attraction and Retention, Stakeholder Engagement, and Climate Strategy. Peer group: ELC Electric Utilities.
Upper quintile (Oct 2022)
Average performance across three assessments 85th percentile (upper quintile) 100% 183 SSE plc Annual Report 2023.
Financial Statements Strategic Report Directors’ Report.
The personal and operational goals will be assessed using a scoring framework as follows:
Score Illustrative performance assessment Illustrative outturn as % of maximum1 1 Below threshold Zero 2 Threshold performance 20% 3 Majority of goals at target 40% 4 Substantial majority of goals at or above target 70% 5 All goals at or above target 100% 1 The Remuneration Committee can decide to award an outturn between levels if warranted.
The measures for awards under the Performance Share Plan for 2023 PSP measures for the 2023 award will remain largely unchanged. Relative Total Shareholder Return (TSR) and EPS account for 50% and 20% respectively of the total and the new sustainability and strategic measures 30% of the total award as follows:
Performance measure.
Total Shareholder Return relative to the FTSE 100.
Total Shareholder Return relative to the MSCI European Utilities.
Adjusted Earnings Per Share Strategic Sustainability.
Weighting 20% 30% 20% 15% 15%
Threshold performance 50th percentile (20% outturn) 50th percentile (20% outturn) 149p (20% outturn) See below See below.
Maximum performance 80th percentile (100% outturn) 80th percentile (100% outturn) 178p (100% outturn) See below See below.
The TSR performance targets were strengthened last year with 20% of that element vesting for median performance (previously 25%) and full vesting of that element only achieved at 80th percentile ranking (increased from 75th percentile).
The growth targets for EPS have been set based on SSE’s plan over the next three years and represents a CAGR between 12% and 17% based off FY22 EPS of 94.8p. The top end of the range exceeds the Board’s expectations and is considered stretching. The Committee will assess the growth targets for future awards under the PSP to ensure that they remain challenging and linked to the business plan.
Strategic measures and targets for the 2023 PSP award The measures and targets for this element are linked to the Remuneration Committee’s assessment of SSE’s performance over the three years to 31 March 2025 in the three main areas of the implementation strategy which have been updated this year to reflect the NZAP Plus.
Strategic area in NZAP Measures and targets.
Renewables 8GW pipeline of net installed capacity potential and 0.5GW of international under construction by FY26.
Networks growth Transmission and Distribution to exceed the NZAP Plus RAV growth targets of £7 and £6 billion respectively.
Energy businesses Solar and battery installed capacity to meet 1GW by FY26.
Customer On course to be a leading ppa player in the market by 2026.
Sustainability measures and targets for the 2023 PSP award.
SSE’s UN SDG 2030 Goal Measure and Targets.
SDG 13 Climate Action: Reduce scope 1 carbon intensity by 80% by 2030, compared to 2017/18 levels, to 61gCO2e/kWh.
Scope 1 carbon intensity reduction to 61gCO2e/kWh.
SDG 7 Affordable and Clean Energy: Build a renewable energy portfolio that generates at least 50TWh of renewable electricity a year by 2030.
Renewables output TWh tracked to 2026/27. Renewables output TWh by 2030/31.
SDG 9 Industry, Innovation and Infrastructure: Enable at least 20GW of renewable generation and facilitate around 2 million EVs and 1 million heat pumps on SSEN’s electricity networks by 2030.
GW renewable generation capacity connected to SSEN’s electricity transmission network by 2026. Low-carbon technologies connected to SSEN’s local electricity distribution networks by 2028.
SDG 8 Decent Work and Economic Growth: Be a global leader for the just transition to net zero, with a guarantee of fair work and commitment to paying fair tax and sharing economic value.
Achieve performance in the top 10% of rankings on average for progress on Just Transition, including in the World Benchmarking Alliance (WBA) and others as they emerge.
Performance against the strategic and sustainability measures and targets will be assessed using the same scoring framework shown above in respect of the personal and operational measures and targets for the AIP. Further detail on the performance outcome for 2022/23 and the changes to the Remuneration Policy can be found within the Remuneration Committee Report in SSE’s Annual Report 2023, on pages 166 to 187.
The risk that SSE’s strategy, investments or operations are deemed to have an unacceptable future impact on the natural environment and on national and international targets to tackle climate change.
The physical impacts of climate change, such as severe weather that can interrupt energy supply or generation, and the transitional risks relating to developments in political and regulatory requirements on the products and services SSE provides, have potential to impact SSE’s operations. SSE’s work to reduce its impact on climate change and the consideration of longer-term key climate-related risks and opportunities is detailed on pages 14 to 29.
The risk that SSE develops and builds major assets that do not realise intended benefits or meet the quality standards required to support economic lives of typically 25 to 60 years within forecast timescales and budgets.
SSE’s investment in large infrastructure projects can have considerable social, economic and environmental consequences. To deliver high-quality projects, SSE works closely with suppliers and contractors to ensure its values on issues such as environmental protection, safety, modern slavery and fair pay, are upheld. SSE’s work to promote and embed sustainability within its supply chain is detailed on pages 46 to 48.
The risk that energy customers’ ability to meet the costs of providing energy, or their ability to access energy services is limited, giving rise to negative political or regulatory intervention that has an impact on SSE’s regulated networks and energy businesses.
SSE seeks to support the transition to net zero through disciplined investment in developing and operating low-carbon energy infrastructure, and delivering this in a way that represents value for money for energy customers. It works to ensure that the energy it supplies to customers is not only affordable but is accessible too, and it strives to offer services that are inclusive to all. See pages 30 to 39.
The risk that SSE is unable to attract, develop and retain an appropriately skilled, diverse and responsible workforce and leadership team, and maintain a healthy business culture which encourages and supports ethical behaviours and decision making.
An ethical business culture alongside the talent and skills of SSE’s employees enable it to fulfil its purpose and achieve its strategic goals. SSE has a long-standing commitment to fair and decent work and seeks to provide an inclusive, fulfilling and high-performing workplace. SSE’s responsible approach to attracting, developing and retaining a future skilled workforce is detailed on pages 65 to 73.
Climate Change Energy Affordability.
Large Capital Projects Management People and Culture.
The risk associated with operating in a fast-paced, highly regulated environment which is subject to constantly changing political, regulatory and legislative expectations and interventions.
SSE aims to work constructively with governments and regulators to help deliver net zero, whilst ensuring the energy system works in the interest of energy customers. SSE’s activities are influenced by international and national agreements on climate change, and sustainability issues are increasingly included in regulatory and legislative requirements. See page 26.
The risk of harm to people, property or the environment from SSE’s operations.
SSE has an uncompromising commitment to keep people safe and healthy, and to respect the environment in which it operates. SSE’s working environment includes challenging geographic locations and adverse weather conditions, which can impact its activities. It has clear safety and environmental processes and training in place to address these risks. SSE’s safety, health and environment performance and initiatives are detailed on pages 75 to 76 and 78 to 87.
Politics, Regulation and Compliance Safety and the Environment.
Managing sustainability-related risks.
The execution of SSE’s strategy and the creation of value from the opportunities arising from net zero are dependent on the effective identification, understanding and mitigation of the Group’s Principal Risks.
Sustainability in the Group Principal Risk context Whilst all the Group Principal Risks are relevant to the sustainable development of SSE, those with particular significance to social and environmental impacts are outlined below. More information can be found in SSE’s Group Principal Risk report and SSE’s Annual Report 2023, pages 68 to 77, which detail key developments during the year and key mitigations SSE has in place.
ESG ratings and indices performance page 95.
SASB Standards disclosure pages 96 to 97.
Additional information SSE’s Sustainability Report 2023 is complimented by the Annual Report 2023, as well as a range sustainability disclosures, which can be found on sse.com/sustainability. Examples of additional disclosures include:
Sustainability data tables Detailed environmental, social and economic data is available to download from SSE’s website. For transparency, three years’ worth of data is provided against each indicator where possible.
GHG and water criteria documents The criteria document details the reporting approach SSE uses to disclose GHG and waterrelated information related to its operational activities. The criteria is updated annually.
Gender pay gap information SSE’s UK and Irish gender pay gap information is available to download on SSE’s website. More detail on SSE’s gender pay gap and diversity information can be found in SSE’s Inclusion and Diversity Report 2023.
Modern slavery statements SSE’s Modern slavery statements set out the steps taken by SSE to identify and prevent modern slavery and human trafficking existing within its business and supply chains. All statements since 2016 are available to download.
Group Policies SSE makes key sustainability-related Group Policies publicly available on its website, outlining SSE’s approach to promoting a healthy business culture and guiding decisions and actions as expected by its stakeholders.
ISO certification SSE’s ISO 14001:15 (Environmental management systems) and ISO 45001:18 (Occupational health and safety management systems) certificates are available to download from its website.
94 SSE plc Sustainability Report 2023.
Performance and disclosures.
SSE seeks to provide comprehensive information for the benefit of its stakeholders, and does so through this report and a variety of additional information sources through its website and in standalone reports. It also seeks to align to commonly understood sustainabiltiy disclosure standards.