Our Planet

Establishing Strategic Management Actions

Alongside target setting we have also established the following Strategic Management Actions which business areas are now prioritising:

• Electric vehicles – improving our capability and understanding to support the transition to EVs.
• Supply chain – implementing a Supply Chain Sustainability Programme to engage and influence suppliers.
• Flood resilience – influencing policy makers on the importance of flood defences and shaping thinking around resilient repairs.
• Underwriting footprint – evaluating the impact of climate change on our underwriting footprint so that we can manage risks to our business and help inform strategic decision-making.

Our approach in action

All of our rescue recovery trucks at our Birmingham Auto Services site are now running off hydrogenated vegetable oil (HVO). This test and learn project is aiming to reduce our well-to-wheel carbon emissions from diesel by more than 80%. If successful we plan to roll out this alternative fuel across other Auto Services sites.

Group emissions We believe accurate measurement and transparency can guide the business in making targeted interventions as part of our carbon reduction strategy. We implemented a number of test and learn activities, and continue to innovate and explore a range of solutions. We have provided a comparison of emissions data for Scope 1, 2 and 3 with greater clarity of the activities under our direct control, as well as our supply chain emissions. 100% of the emissions reported relates to operations all of which are based in the UK. The data is reported in compliance with the SECR requirement to disclose annual global GHG emissions (see page 87 of our Annual Report for more information).

Definitions

Scope 1: This covers direct emissions from owned or controlled sources. For example, our office sites throughout the UK using gas boilers, the paint booths in our Auto Services sites currently relying on gas powered processes and our fleet vehicles.

Scope 2: These are indirect emissions. They are emissions associated with the production and transmission of energy we eventually use as a company across our office and Auto Services sites. For example, the production of the electricity we buy to heat and cool our buildings generates emissions.

Scope 3: These are indirect emissions that occur in the value chain to support our company operations. For example, employee commuting, activities related to the disposal of waste and the goods and services we purchase to fulfil customer claims as part of our supply chain. It will also include our investment portfolio which we are currently evaluating as we work to set Science-Based Targets.

Reporting methodology: We comply with the applicable greenhouse gas reporting requirements of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 and apply the GHG Protocol Corporate Accounting and Reporting Standard (revised edition) to calculate our emissions, which includes emissions associated with electricity consumption.

Our carbon emissions are calculated by an external third party and reviewed internally. The calculation method used for 2021 remains consistent with prior periods and with the reporting standards stated above

Notes:

1. Figures for Scope 2 use standard location-based methodology. We follow GHG Protocol to disclose both location and market-based figures; and as we have secured our energy from 100% renewable sources since 2014, our Scope 2 market-based results are nil.

2. Employee commuting is based on UK national averages, not actual individual methods of transport of Direct Line Group employees commuting. This data is not currently tracked.

3. Upstream leased assets refer to leased office space locations where Direct Line Group does not directly control the energy provision as it is included in the service agreement

4. Total of Scope 1&2 emissions and Scope 3 emissions under our direct control.

5. In accordance with the GHG Protocol under which we report, the following are excluded from the total:

a. operational control activities already detailed under 'Scope 3 emissions under our direct control'; a. cash payments to customers or other insurance companies / legal firms as compensation;

b. intragroup transfers between our operating companies for financial accounting purposes as the actual purchase of goods and services to our third party suppliers is already captured; and

c. reinsurance costs to third party reinsurers as this is a financing transaction

Working with our supply chain

Our influence can extend far beyond our direct operations. We want to understand where the emissions sit in our supply chain and recognise the importance of publishing them to assist transparency and accountability. We are using our established relationships and purchasing capabilities through procurement to mitigate our risks by seeking to reduce the emissions in our supply chain. The Group’s Ethical Code already sets out our expectations of suppliers that they should support a precautionary approach to environmental challenges, promote greater environmental responsibility and encourage the development of environmentally friendly technologies. We are now going one step further by launching our Supply Chain Sustainability Programme outlining our plan for the next ten years. We recognise this will be a gradual process but by acting now we can work with suppliers by signalling our expectations so that we can make the transition to a pathway consistent with a 1.5 degrees emissions scenario.

Our investments

We will include our investment portfolio as part of our commitment to set Science-Based Targets. We are evaluating our Investment portfolio but have already set the following targets to guide our approach:

• 100% of our portfolio will be net carbon neutral by 2050
• Corporate bond portfolios are to have a 50% reduction in weighted average greenhouse gas emission intensity by 2030
• A preference for companies with carbon reduction targets approved by the Science Based Targets initiative
• A preference for companies with at least a 2°C carbon performance alignment with the Transition Pathway Initiative
• The exclusion of any companies with a carbon transition score indicating assets could be economically stranded
• The exclusion of any mining companies that generate >5% of revenues from thermal coal production and electricity generators that derive >5% of revenues from thermal coal power generation (unless, in either case, the company has an approved Science Based Targets initiative plan)
• The exclusion of any companies that are developing new thermal coal mines or coal burning power plants
• Ensuring all of our investment-grade corporate bond portfolios maintain an average MSCI ESG  rating of ‘AA’

In setting Science-Based Targets, we recognise that some of the existing investment portfolio targets may need to be amended, or new targets added, in order to meet the criteria set.

More about this in our Sustainability Report