Vattenfall - Group Management System

Group Management System

General information on Group’s Management System

The Group is governed with a focus on value creation and long-term overarching goals and requirements for the Business Groups and Business Units. The Business Groups propose short-term goals for each Business Unit, which are subsequently approved by the CEO and Executive Group Management (EGM). To ensure that Vattenfall develops in the intended direction and lives up to ethical and legal requirements, the CEO has established a Group Management System (GMS), which also includes a description of how the Group is governed. Integrated with the GMS is an Environmental Management System (EMS), which governs how the Group manages environmental issues. The GMS and EMS are available to all employees on the Group’s intranet. The GMS consists of a number of building blocks. Management is based on Vattenfall’s mission and vision, the Group-wide Code of Conduct and company philosophy, and on the Group’s policies in key areas. The GMS is documented in governing documents, consisting of Group policies, Group instructions and other documents. The Group policies describe the intentions for action on mattersof importance for the Group, while Group instructions provide more detailed and operative control, and lay down mandatory rules. The “Roles and Allocation of Responsibility” instruction defines decision-making bodies and fundamental roles within the Group. The “Principles for Decision-Making and Delegation” is another central instruction that covers delegation from the CEO to the heads of the Business Groups, GroupFunctions and Group Shared Services. The Group’s management processes for strategic planning, business planningand follow-up are central governance tools for the Executive Group Management (EGM). The Group functions are responsible for proposing, developing and following up Group policies and instructions. The Vattenfall Group has a Quality Function charged with co-ordinating the GMS. Both the Head of Group Quality Functionand the Head of Group Environment must approve all Group policies and instructions prior to final approval. All governing documents at the Group level are submitted to the Executive Group Management for approval. All activities within Vattenfall are obligated to comply with the GMS governing documents. Consequently, each Business Group has a complementary management system that is adapted to the detailed requirements of its operations. Group Function Internal Audit is responsible for ensuring compliance with the GMS. Special routines are in place to ensure that the GMS and EMS are also applied by subsidiaries. With respect to subsidiaries in the Nordic countries, this is done in part through special owner statements at Annual General Meetings with the purport that the management systems shall also apply for the respective subsidiaries within the framework of applicable laws, etc. These owner statements are a part of Vattenfall’s management systems and enable Group-wide governance of operation in accordance with the intentions that are ultimatelyadopted at Vattenfall AB’s Annual General Meeting. The Group’s Internal Audit function is responsible for reviewing and evaluating compliance with the GMS.

Organisation and processes

Vattenfall’s organisational model is based on the electricity and heat value chains: for electricity – generation, transmission, distribution and sales, and for heat – generation, distribution and sales. The President, who is also the Chief Executive Officer, heads the Group’s business operations and administration in accordance with the Swedish Companies Act and the Board’s instructions. Reporting and follow-up of the business operations are conducted with full transparency in accounting, control, profitability and value creation. In terms of management, Vattenfall’s operations are broken down into three categories:

• Business activities are handled by Business Groups and their Business Units in defined geographic areas.
• Group and Business Group functions that support their respective management teams.
• Shared Service units, which provide services that support their customers’ (internal Business Units and others) efforts to optimise their business activities. Shared Service activities are run on a full cost basis and operate at both the Group (Group Shared Services) and Business Group levels.

A number of management processes that are essential for the Group have been established. Each process is managed by a process owner, usually a member of the EGM, who is responsible for developing the process. At present, the following Group processes exist:

The strategy and business planning process culminates in yearly strategy and business plans. This process includes the analysis and assessment of strategic issues for ongoing evaluation with decisions on selection, formulation and prioritisation made by the EGM. Strategy planning includes the Group’s long-term operations as well as its financial performance. Each year a five-year strategic plan is drafted for decision by Vattenfall’s board. Based on the directives of the strategic plan, the Business Groups and Business Units draw up three-year business plans that are ultimately approved by the EGM. The business plans for the following calendar year are adopted by the Board.

Governing business ethics

Vattenfall’s core values are:Openness, Effectiveness and Accountability. Vattenfall’s joint-Group Code of Conduct and company philosophy stipulate that all employees shall adhere to and work in accordance with Vattenfall’s core values, policies and Group instructions. The stipulations of the Code are concretised in other parts of the GMS, such as in instructions for general legal and business ethics principles and competition matters. Further information on governing business ethics is provided in Vattenfall’s CSR Report.

CSR report