Safely and reliably delivering earth's resources.
Use the filtering feature below to sort ESG topics across several key areas. Select individual tiles to learn more about Essential’s efforts and initiatives.
-
Good Health and Well-Being
-
Industry Innovation and Infrastructure
-
Gender Equality
-
Reduced Inequalities
-
Clean Water and Sanitation
-
Responsible Consumption and Production
-
Affordable and Clean Energy
-
Climate Action
-
Decent Work and Economic Growth
-
Peace, Justice and Strong Institutions
- Providing reliable utility services that are consistent with applicable standards for public health and environmental quality
- Continuing capital investment in system improvements, including rehabilitation and replacement of key infrastructure
- Treating employees fairly, communicating openly and providing opportunities for development and growth to retain a well-trained workforce and the necessary management depth so that succession planning is an integrated element of the culture
- Ensuring courteous and responsive service to customers, regulators and public officials
- Demonstrating leadership through civic involvement in the communities we serve, acting as stewards of the environment and being proactive in the development of public policy issues crucial to the success of the water, wastewater and gas industries
- Maintaining a safe environment for our customers and employees
- Remaining a reliable investment of choice for utility investors based on growth in earnings, dividends and total return to shareholder
- DRINKING WATER
- 1,497 Water Systems
- 885,032 Connections
- 83.8 Billion Gallons of Total Water Production
- WATER SOURCES
- 58% Surface
- 37% Ground
- 5% Purchased from Other Systems
< 500
501 - 3,300
3,301 - 10,000
> 10,000- 198 Wastewater Systems
- 141,672 Connections
- 12.3 Billion Gallons Treated
- 71% of Capacity*
< 100K- 100K - 249,999
- 250K - 499,999
- 500K - 999,999
- > 1M
- Water
- Wastewater
- Water Target
Wastewater Target- Collection System Pipe Break
- Plant WW Spill
- SSO
- Unpermitted Plant Bypass
- Unidentified
- Replacing aging pipes and water mains before they leak or break
- Updating water meters to more accurately measure water consumption in real time and identify possible leaks in our customers’ homes
- Reusing water in various, essential ways at our water and wastewater treatment plants.
- 92% of this waste came from the treatment of water
- 8% of this waste came from the treatment of wastewater
- 48% (29,263 tons) of this solid waste is beneficially reused
- 51% (31,323 tons) of this waste was sent to landfills, or further processed at another facility
- Less than 1% (492 tons) of this waste was incinerated at a permitted facility
- 0.3% (or 168 tons) came from our offices. Of this 168 tons of material, 32% was recycled and 50% incinerated by our trash hauler. This was taken to a trash to steam plant to be resourced as fuel material for further energy generation. The remaining 18% of office waste was sent to landfills
- Pandemic trigger points, assessed on a three-tier level system
- Worker safety
- Permit compliance
- Sustainability of critical operations
- List of primary and back up operators (licenses), as well as information pertaining to who has been trained and prepared to step in during cases of emergency
- Modification to normal and routine business workflow
- List all facilities, along with their classifications and licenses
- Connections for pumps and tanks
- Length of hose needed
- Generator receptacle, phase, KW and voltage
- Length of leads needed
- Vehicles with 4WD to access remote facilities
- Minority-owned Business Enterprise (MBE)
- Women-owned Business Enterprise (WBE)
- Veteran-owned Business Enterprise (VBE)
- Person with Disabilities-owned Business Enterprise (PDBE or DISABLED)
- Lesbian, Gay, Bisexual, Transgender-owned Business Enterprise (LGBT)
- State or local government certifying agencies
- National Minority Supplier Development Council (NMSDC)
- Women’s Business Enterprise National Council (WBENC)
- National Veteran Business Development Certification (NVBDC)
- The National Lesbian, Gay, Bisexual, Transgender Chamber of Commerce (NGLCC)
- Make efforts to avoid causing or contributing to human rights violations
- Mitigate and/or remediate adverse human rights impacts of our operations where possible
- Prohibit the use of child labor, forced labor, and human trafficking
- Be transparent in our efforts, successes, and challenges
- Recognizing conflicts of interest and their prohibition within the company
- Limiting gifts and gratuities from contractors, vendors and suppliers to nominal value
- Standards for maintaining accurate records
- Limiting the use of company resources to business purposes
- Restricting personal benefit from business opportunities arising from company business
- Safeguarding confidential information and restricting its use within the company
- Appropriate, safe and secure use of computers and technology
- Guidelines on public communications about business activity and the company
- Activity by the company’s political action committee and political activity by employees
- Respect in the workplace, including issues involving discrimination and harassment
- Maintaining a healthy and safe environment for employees, customers and the public
- Complying with applicable laws and regulations and reporting criminal conduct
- Purchasing and selling company stock and prohibitions on insider trading.
About this Report
Essential Utilities Inc.’s environmental, social and governance (ESG) report details efforts and performance for the calendar year 2019. Formerly Aqua America, Essential’s new name became effective Feb. 3, 2020 to reflect the combination of regulated water utilities, Aqua, and natural gas utilities, Peoples, that offer essential utility services to customers. Data in this report reflects the company as of Dec. 31, 2019, prior to the acquisition of Peoples on March 16, 2020.
The foundation of ESG at Essential has been underway for many years through both companies’ commitments to the communities we service, our employees, and the environment. Ongoing updates of this report present an excellent opportunity to transparently share and evaluate our progress. While our water and wastewater business, formerly Aqua, is actively tracking against benchmarks that are highlighted in this report, we have quickly taken efforts to assess and integrate relevant data from Peoples, and will further report on benchmarks and progress relating to our gas business in future ESG reports.
This 2019 ESG report integrates various reporting frameworks, namely the Sustainability Accounting Standards Board (SASB) and Task Force on Climate-related Financial Disclosures (TCFD). Disclosures that fulfill these standards are noted by indicators within the report and in the ESG Tear Sheet. For more information, please explore our ESG Hub, which, in addition to this report, houses our tear sheet and TCFD report.
For more information on Essential’s ESG initiatives, contact ESG@Essential.co with questions or comments.
Sustainability Accounting Standards Board
The purpose of the Sustainability Accounting Standards Board (SASB) is to establish industry-specific disclosure standards across ESG topics that facilitate communication between companies and investors about financially material, decision-useful information.
United Nations Sustainable Development Goals
Essential is committed to supporting the achievement of the United Nations Sustainable Development Goals (SDGs), which aim to address global challenges and achieve peace and prosperity for all. Of the SDGs, our ESG program supports and aligns most closely with the following ten. As we continue to enhance our ESG program, we will seek ways to further how we can positively impact the SDGs.
Task Force on Climate-related Financial Disclosures
The TCFD is an industry-led initiative created to develop a set of standards for voluntary climate-related financial disclosures. These are aimed at all financial actors, from companies and investors to asset owners and managers, as the goal is to provide consistent and transparent information to global markets.
Forward-Looking Statements
This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which generally include words such as “believes,” “expects,” “intends,” “anticipates,” “estimates” and similar expressions. The company can give no assurance that any actual or future results or events discussed in these statements will be achieved. Any forward-looking statements represent its views only as of today and should not be relied upon as representing its views as of any subsequent date. Readers are cautioned that such forward-looking statements are subject to a variety of risks and uncertainties that could cause the company’s actual results to differ materially from the statements contained in this release. Such forward-looking statements include, but are not limited to, statements relating to the capital to be invested by the water, wastewater, and gas distribution divisions of the company. There are important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements including the factors discussed in our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q, which is filed with the Securities and Exchange Commission. For more information regarding risks and uncertainties associated with the company’s business, please refer to the company’s annual, quarterly and other SEC filings. The company is not under any obligation — and expressly disclaims any such obligation — to update or alter its forward-looking statements whether as a result of new information, future events or otherwise.
About Essential
With the closing of the Peoples acquisition in March 2020, Essential became one of the largest publicly traded water, wastewater and natural gas providers in the U.S., serving approximately 5 million people across 10 states under the Aqua and Peoples brands.
Each utility lends more than 130 years of experience in, and commitment to, proactive infrastructure investment, regulatory expertise, operational efficiency and environmental stewardship. We recognize the importance of water and natural gas in everyday life and are proud to deliver safe, reliable services that contribute to the quality of life in the communities we serve.
As utility infrastructure experts, we are passionate about responsibly making improvements that strengthen reliability and safety of our nation’s infrastructure. We are grounded in a deep-rooted purpose that empowers people to live better lives. Integrity, respect and excellence are the core values that guide us. We put customers at the center of all we do, while creating a culture of trust and safety for employees. We recognize the importance water and natural gas play in everyday life and are proud to deliver safe and reliable services for the greater good of the communities we serve. We are Essential – providing natural resources for life.
Corporate Profile
Essential is proud to serve a growing number of customers and communities around the United States.
$889.7M
REVENUE
3.0M
PEOPLE SERVED
8
STATES
1,600+
FULL-TIME EMPLOYEES
83.8B
GALLONS OF
DRINKING WATER
1,497
WATER SYSTEMS
885,032
WATER CONNECTIONS
12.3B
GALLONS OF
WASTEWATER TREATED
198
WASTEWATER SYSTEMS
141,672
WASTEWATER CONNECTIONS
*Data is for Aqua only, as of December 31, 2019.
Mission
To improve quality of life and economic prosperity by safely and reliably delivering earth's most essential resources.
Vision
Essential Utilities is uniquely positioned to play an important role in solving today’s water and natural gas challenges by renewing and improving infrastructure through thoughtful capital investment, operational excellence, environmental stewardship and rigorous safety standards. Through our work, we help strengthen communities, improve service and enhance economic development, enabling people to lead better lives. This vital work empowers us to grow as an organization and as individuals. Together, we will make a difference for generations to come.
Core Values
Peoples Acquisition
On March 16, 2020, Essential successfully completed the acquisition of Peoples, a Pittsburgh-based natural gas distribution company. There are many similarities between Peoples and Aqua. Both companies are focused on investing in the rehabilitation of pipeline infrastructure and are committed community partners.
Peoples has been providing natural gas service in western Pennsylvania since 1885. Today, Peoples is the largest natural gas distribution company in Pennsylvania and serves approximately 740,000 customers in Pennsylvania, West Virginia and Kentucky. Peoples proudly employs more than 1,500 people who live and work in the same communities it serves.
Growing Together
Aqua and Peoples share a dedicated commitment to operational excellence and a strong ESG focus.
1,773,253
CUSTOMER CONNECTIONS
3351
PIPELINE RELACEMENT2
3,1001
EMPLOYEE BASE
1,600
EMPLOYEE BASE
1851
PIPELINE REPLACEMENT2
1,026,704
CUSTOMER CONNECTIONS
746,549
CUSTOMER CONNECTIONS
1,5001
EMPLOYEE BASE
1501
PIPELINE REPLACEMENT2
1 Approximate.
2 Pipeline replacement is measured in miles on an annual basis.
Due to the finalization of the Peoples acquisition in 2020, results from Essential’s natural gas division will not be included in this report. However, results from Peoples efforts will be integrated in future reporting. Below are highlights of Peoples’ recent environmental efforts.
Peoples is working on an extensive upgrade to our gas infrastructure to reduce our carbon footprint, create more local jobs, keep our customers and communities safe and make a long-term impact on our region’s vitality. Launched in 2013, the goal of the Peoples Long Term Infrastructure Improvement Plan (LTIIP) is to replace 3,000 miles of old bare steel and cast iron pipeline in our service territory by 2034. Each mile of new pipeline has a positive effect on the environment, as it helps to significantly reduce methane emissions. These upgrades also improve the reliability and safety of our system, in addition to being an augmentation of the company’s founding membership in the U.S. Environmental Protection Agency’s Methane Challenge.
Since the beginning of the program, Peoples has removed 714 miles of old pipeline, completing 600 or more projects a year with 60 construction crews. In 2019 alone, we removed 137 miles of pipe through the LTIIP.
In addition to the LTIIP, we’re also working hard to reduce other greenhouses gases across our own operations. Peoples is implementing a gathering systems repair program, which allows for accelerated detection and repair. Construction techniques that minimize methane emissions during replacement and repair activity are also being employed. Further, Peoples is using new equipment that captures gas used during construction and reinjects it into the system.
Peoples is also using its upgraded pipeline system to capture renewable natural gas (RNG). By 2021, we project that we will capture 1.7 Bcf of RNG from six landfills and we continue to explore other opportunities and partnerships to expand our supply.
Reducing our fleet footprint is also a focus, and we have replaced some of our gasoline and diesel-powered vehicles with compressed natural gas (CNG)-powered vehicles. We continue to seek ways to improve the efficiency and reduce the emissions of our fleet.
In addition to delivering natural gas to customers, Peoples also specializes in designing lower emissions solutions for businesses, such as natural gas vehicle implementation and combined heat and power (CHP), with the latter appealing especially to facilities like hospitals and universities that require energy flexibility and reliability. CHP systems allow for distributed energy generation using natural gas and utilizing waste heat for beneficial use on-site. Such systems are up to twice as efficient as conventional heat and power generation. In October 2019, Peoples was proud to announce it would build, maintain, and operate a new microgrid system at Pittsburgh International Airport. The first such system at a major US airport, the innovative microgrid will be powered by both natural gas and solar energy while contributing to reliability, safety and cost efficiency.
The safety of our employees, customers and communities is paramount. Great care is taken to consider best practices and precautions in all our processes and operations. Further, we strive to provide educational resources and tools to raise awareness and create a mindful culture. We maintain an extensive library of safety resources for customers on our website which include tips, hotline information, resources for educating children and best practices for the home or commercial building. We operate an emergency hotline available 24 hours a day and closely coordinate with emergency services.
Peoples was honored by the American Gas Association in 2019, receiving an Industry Leader Accident Prevention Award for achieving a total days away, restricted or transferred (DART) rate lower than the industry average. This accolade is reflective of our strong procedures, controls and programs for employee safety. Peoples also maintains a safety-focused website for contractors performing construction work in our service area that requires digging. This features tips, best practices, case studies, educational resources and a training quiz.
We provide strong support and funding for the communities and regions we serve, donating to many worth-while causes, important community projects, and deserving organizations. Peoples’ employees provide thousands of hours of volunteer service to charitable organizations within our communities.
Covid-19 Response
The COVID-19 pandemic in 2020 shone an even greater light on the importance of access to life-sustaining and essential resources like safe water and reliable natural gas. Our top priority was—as it always is—ensuring people would have essential resources necessary to stay safe at home during the pandemic, and to support our commercial—particularly our healthcare—facilities.
From the start of the outbreak, the team across Essential’s 10-state footprint has been following guidance from the Centers for Disease Control and Prevention and local health authorities to continuously address the situation and evaluate operational response plans with the well-being of our customers and employees at the forefront.
Essential has been incredibly dedicated to keeping our employees safe and healthy during the COVID-19 pandemic. Effective mid-March, all Essential offices were closed and employees were asked to work from home when possible. For those that could not, including all of our vital employees who work in the field, they were given proper PPE and informed of state and local guidelines for proper social distancing.
Essential also thoughtfully balanced the non-emergency interactions between our customers and our field personnel. These procedures adhered to social distancing guidelines and have minimized the need for multiple employees in a vehicle. Critical construction work continued in order to keep our communities safe and helped maintain employment for the companies and vendors who support these projects.
Essential workers were truly essential, and kept hospitals heated and water flowing out of the taps. Knowing their sacrifice, Chris Franklin asked the community to join him in thanking essential workers.
We also understand that, beyond needing our essential resources, many of our customers are struggling with a difficult economic situation. Essential made donations to several nonprofits to support our communities in need during the COVID-19 pandemic and enhanced our low-income assistance programs to help customers struggling to pay their bills continue to receive our services. Our customers are at the forefront of our business, which is why we deeply care for the continued success and happiness of each household we serve. Essential will continue our work to strengthen communities and enhance economic development, one town, one street and one house at a time.
Read more about our response and actions in light of the pandemic.
Measuring Progress Towards Our Targets
Diversity, Equity and Inclusion
Customize
Build Your Report
Build Your Report
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Neque aliquam vestibulum morbi blandit cursus risus at ultrices. Senectus et netus et malesuada fames ac turpis egestas. Id eu nisl nunc mi ipsum. Justo donec enim diam vulputate. Sit amet consectetur adipiscing elit ut aliquam purus sit amet. Phasellus vestibulum lorem sed risus ultricies tristique nulla aliquet. Vestibulum mattis ullamcorper velit sed ullamcorper. Et tortor at risus viverra. Mauris augue neque gravida in fermentum et sollicitudin ac. Posuere urna nec tincidunt praesent semper feugiat nibh sed pulvinar. Euismod lacinia at quis risus sed vulputate. Fringilla phasellus faucibus scelerisque eleifend donec pretium vulputate sapien nec. Ut morbi tincidunt augue interdum velit euismod in pellentesque massa.
Download
TCFD Report
Download
Tear Sheet
Conservation and Stewardship
The mission of Essential is “providing natural resources for life”. Within that, the mission of our water business is “protecting and providing Earth’s most essential resource”. Our company has taken these commitments seriously for more than 135 years. We have participated in environmental conservation and stewardship with numerous partners to preserve and protect sensitive lands, plant thousands of trees, manage invasive species, reintroduce and reestablish native species, and protect habitats in the watersheds for its water supplies. We believe that proper stewardship of our lands leads to healthy and resilient water supplies. Fresh water is a limited resource on our planet, and we need to manage it responsibly through conservation and stewardship to safeguard water security for future generations.
Our Sustainability and Environmental Policy outlines the ways in which we apply our mission to various aspects of our environmental profile. These are carried out by values that permeate our team and operations around the country.
Managing Water and Wastewater Systems
Essential provides drinking water and wastewater services in the communities it operates. Drinking water services can entail removing water from a source such as a river or groundwater well, treating it to meet all standards and then delivering it to the customer. Wastewater services comprise of taking wastewater from customers’ homes via toilet, sink or drain, then delivering it to the wastewater plant for treatment and then returning it to a local stream or body of water, meeting all treatment standards.
As a publicly regulated utility, Essential follows all federal and state water compliance guidelines, including those from the Environmental Protection Agency (EPA). We work hard to meet our goal that all of the nearly 1,500 water systems we own and operate are in compliance with the Clean Water Act and the Safe Drinking Water Act, providing safe and reliable drinking water for all customers.
In each community we serve, we understand the responsibility and opportunity we have to make a difference for public health and the environment, which is why across the organization we work closely with regulators.
We also take seriously our responsibility to provide reliable and efficient wastewater treatment. Between showering, cooking, laundry and dishes, the average Essential customer connection produced 238 gallons of wastewater per day in 2019. Most of that wastewater ultimately ends up back in local rivers or streams, so it is vital that Essential treats all wastewater before it is discharged.
We have the technical expertise and experience to offer superior wastewater services that meet all environmental and public health standards. At Essential, we are continuously modernizing wastewater treatment methods, ensuring our systems are respectful of the surrounding environment and adhering to current and possible future local, state and federal regulations.
Essential improves the water that is delivered from wastewater treatment plants back into water systems. Wastewater treated by Essential is free of disease-causing bacteria, and is safe for all living things – people, animals and plants. After an intensive and thorough filtering process, including screening, primary clarification and biological treatment, most of the wastewater is returned to local rivers and streams. We operate several plants that feature a wastewater reuse program that provides safe and treated irrigate to local businesses, such as golf courses. This prevents discharge to streams and efficiently reduces demand for freshwater supply. We are currently in the process of quantifying the volume of irrigate delivered as part of this program and continue to proactively identify opportunities for wastewater reuse.
Size of Drinking Water Systems
(number of connections, percent of water systems)
ESSENTIAL
UNITED STATES
WASTEWATER
Wastewater System Size and Permitted Capacity
(gallons per day)
Wastewater treatment removes nearly 10,685 metric tons of suspended solids and another 10,000+ metrics tons of organic material, each year**
*17.3 billion gallons of permitted capacity
**Estimated
Compliance With Regulations
Essential maintains a rigorous compliance program in order to meet the requirements of all local, state and federal regulations across our eight-state water and wastewater utility footprint. This includes permits for air, drinking water, wastewater and related materials stored or disposed of as the result of our operational activities.
We track and measure our compliance performance, in accordance with the American Water Works Association’s (AWWA) Utility Benchmarking program. The program tracks the number of days Essential operates in compliance with given permits and regulations for both water and wastewater operations.
Drinking Water and Wastewater Percentage of Days in Compliance
(percent)
Y – axis on figure above is the % of days in compliance using the AWWA benchmarking method. It is calculated by taking the number of days out of compliance and dividing by the total days of compliance available (365 X # of systems) and subtracting from 100%.
Wastewater Compliance
Essential’s primary duty is to meet the requirements of all local, state and federal regulations for its wastewater treatment plants. This means that our wastewater systems achieve greater than 90% removal of regulated elements during the treatment process.
In most cases, we are able to achieve this high level of compliance through the use of secondary treatment processes to remove organics and solid materials. However, in some cases – such as in the sensitive Chesapeake Bay area – we use tertiary treatment to remove nutrients such as nitrogen and phosphorus.
Wastewater Operations Compliance Summary
| Wastewater Operations | 2019 | 2018 | 2017 | |
|---|---|---|---|---|
| Number of incidents of non-compliance associated with water effluent quality permits, standards, and regulations | Incidents | 272 | 361 | 308 |
| Days in Compliance | 95.5% | 94.3% | 95% | |
| SASB: IF-WU-140b.1 | ||||
Drinking Water Compliance
In 2019, 37% of community water systems in the United States observed an EPA violation and 9.2% of systems had health-based violations. In 2019, Essential performed almost seven times better than community water systems nationwide, with just 1.3% of our systems experiencing a health-based violation. Any time Essential receives a health-based violation requiring a boil advisory, customers are notified and we take immediate action. We continually strive to reduce this number year over year.
Percentage of Water Systems with Health-based Violations
| Drinking Water Operations | 2019 | 2018 | 2017 |
|---|---|---|---|
| Percent of systems with health-based violations (Tier 1 and Tier 2) | 1.3% | 1.8% | 1.6% |
2019 Detailed Breakdown Below of Drinking Water Violations
| Tier 1 (acute health-based) |
Tier 2 (non-acute health-based) |
Tier 3 (non-health based) |
Total | |
|---|---|---|---|---|
| System Count | 12 | 8 | 63 | 83 |
| # of Tiered Violations | 12 | 13 | 63 | 88 |
| # of Essential Systems | 1,497 | 1,497 | 1,497 | 1,497 |
| # of Systems with Tiered Violations | 0.8% | 0.5% | 4.2% | 5.5% |
* Tiers as defined as per EPA regulations. https://www.epa.gov/dwreginfo/public-notification-rule
Tier 1 violations are defined as those violations of the National Primary Drinking Water Regulations (NPDWR) that require public notice and have significant potential to have serious adverse effects on human health as a result of short-term exposure.
Tier 2 violations are defined as violations of the NPDWR that require public notice and have potential to have serious adverse effects on human health.
Tier 3 violations are defined as violations of the NPDWR not included in Tier 1 and Tier 2 that require public notice but are not considered to have a direct impact on human health (such as violations of monitoring and reporting).
Drinking Water Compliance Vs. U.S. Averages
Measured as percentage of community water systems with health-based violations
| 2019 | 2018 | 2017 | |
|---|---|---|---|
| Essential | 1.3% | 1.8% | 1.6% |
| United States | 9.2% | 10.2% | 10.6% |
| Outperformance | 7.1X | 5.7X | 6.6X |
According to the EPA, about one in 10 U.S. community water systems have health-based violations. Fewer than one in 50 Essential community water systems have health-based violations. We are proud of our track record of out-performing the U.S. at-large by, typically, at least six times and are consistently working towards improving that figure through investments in water treatment and infrastructure. About 93% of our water systems are comprised of fewer than 500 connections. Even when Essential’s very small water systems are compared with U.S. averages for this specific size bracket, the trend still holds: we perform about seven times better.
SASB: IF-WU-250a.1
7.1X
OUTPERFORMANCE
Essential consistently and widely outperforms the national average for percentage of community water systems with health-based violations. 2019 was no exception and we remain steadfastly committed to the health and safety of our customers.
Managing Contaminants of Emerging Concern
Managing emerging contaminants is a continuous process as science improves our ability to detect and understand the impacts of chemicals in use for decades as well as newly developed chemicals. We see todays’ emerging contaminant as tomorrow’s potential element we need to address for our customers and communities. We consider the latest science and research to identify potential contaminants of concern for further review, evaluation, or action. This typically includes the prevalence and levels of the chemicals, as well as their potential to cause human health or environmental harm. Based upon this information, we may choose to look at specific geographic locations or types of systems to further understand the environmental occurrence and behavior of these compounds. If the levels warrant action, then remediation of the source of the chemical is the first preferred method, to avoid removal in the drinking water or wastewater process. If the source is too diverse or not easily identifiable, then treatment technologies are evaluated for installation to protect customers. With this knowledge we work with environmental regulators and with public utility commissions to gain the necessary acceptance and permissions to implement the treatment solutions. As this is conducted, efforts are developed to communicate findings with various agencies, organizations, and customers. Finally, we review all the impacts from our activity footprint to consider long term sustainability impacts on activities like material disposal.
In the past, Essential has reviewed chemicals such as pesticides, pharmaceuticals, and personal care products. Currently we are conducting and monitoring scientific activities for per and poly-fluoro alkyl substances (PFAS – PFOA, PFOS, etc.), cyanotoxins, lead and manganese. A new, state-of-the-art laboratory under construction in Bryn Mawr, Pennsylvania will be the only utility-owned facility in the state that is both certified and accredited to test for PFAS substances.
In February 2020, we announced that we will, over several years, install mitigation technology at water treatment facilities where source water exceeds 13 parts per trillion (ppt) for any PFAS substance. PFAS are a concern in communities across the country where groundwater is believed to have been contaminated by nearby military bases or other causes. Setting a company-wide standard of 13 ppt, well below the EPA’s non-enforceable health advisory level of 70 ppt, will enable Essential to address the contaminant uniformly across its footprint.
SASB: IF-WU-140b.2; SASB: IF-WU-250a.2
Water Infrastructure and Resiliency
Investing in our Nation's Infrastructure
The U.S. has a very fragmented network of aging water systems, with more than 150,000 water systems serving nearly 320 million people. Most Americans – just under 300 million people – receive their drinking water from one of the nation’s 51,000 community water systems, many of which are municipally managed. While many of these municipally-managed systems are well run, there are also many that are facing serious compliance challenges, due to aging water and wastewater infrastructure, increasingly stringent drinking water and wastewater regulations, and budgetary constraints.
For municipalities, it’s not an easy job to prioritize competing budget needs, and it is easy to overlook the state of pipes in favor of other priorities. But prolonging an investment in water infrastructure is a risky decision that can have serious consequences on the safety and reliability of a water system over time. We are proud to play a leading role in providing solutions for water and wastewater systems that are struggling with these challenges.
Essential is committed to renewing and improving water and wastewater infrastructure through thoughtful and continuous capital investment. By leveraging our compliance expertise, purchasing power and operational efficiencies, we have infused needed capital and resources into the systems we own and acquire to rehabilitate the infrastructure required for reliable drinking water and efficient wastewater services. It’s a responsibility about which we feel strongly – and it’s why we have invested more than $2 billion in infrastructure improvements and replaced more than 800 miles of aging water main since 2012.
Unplanned Service Disruptions
| 2019 | 2018 | 2017 | |
|---|---|---|---|
| Number of unplanned service disruptions | 2,486 | 2,407 | 2,309 |
| Number of unplanned service disruptions (normalized by 100 miles) | 18.2 | 17.6 | 16.9 |
Note: This apparent increase is likely driven by better data collection and data quality that we have been working towards in recent years, across each of our states. We believe that, in actuality, there has been a decrease in unplanned service disruptions across the company and this is true when we look at certain individual state operations. We hope these data improvements will allow for more direct year-on-year comparisons in the future. We believe it is likely that these figures are artificially inflated due to a different definition of “unplanned service disruption” across some of our operations. We are investigating this matter and working towards a consistent definition across all of our states in line with AWWA guidance.
SASB: IF-WU-450a.3
Sanitary Sewer Overflow
By industry standards, a sanitary sewer overflow (SSO) is an event where untreated sewage is discharged from a sanitary sewer into the environment prior to reaching sewage treatment facilities. At Essential, we internally define an SSO event more broadly to include any discharge of untreated or partially treated sewage from the collection system and the wastewater treatment plant to the ground or water body. This helps provide a greater awareness and emphasis on environmental impacts that should be mitigated. For example, in 2019, only 22% of the SSO volumes that we track would be regarded by industry standards as stemming from a traditional SSO event related to the collection system piping.
An SSO can be caused by a variety of things including pipe clogging due to fats, oils, grease, debris and tree roots. An SSO can also be caused during wet weather periods when the sewer system capacity is exceeded by infiltration and inflow of groundwater through cracks in the pipe system. Further, an SSO can also be caused by equipment failures at pump stations due to mechanical or electrical failures causing the system to overflow. In 2019, we observed 154 sewage related events that discharged 2.4 million gallons of untreated or partially treated sewage. We observed that 73% of this volume was related to a precipitation event.
At Essential, we work to reduce SSOs and sewage related events by regularly inspecting sewer pipes, cleaning sewer pipes, replacing aging sewer pipes to reduce inflow and infiltration, maintaining and upgrading our pump stations, educating customers about what not to put down the drain and monitoring fats, oils and grease from businesses. We also work to improve the capacity of our wastewater treatment facilities to handle peak flows.
In the charts below, we detail data related to SSOs as it is defined conventionally by industry. As noted, this is a narrower definition of SSO than what Essential internally evaluates.
2019 Untreated or partially Treated Sewage Discharge Types
SSO Occurrences (Industry-Defined) in Our Wastewater System
| 2017 | 2018 | 2019 | |
|---|---|---|---|
| Number of Events | 114 | 137 | 122 |
| SSO volume (gallons) | 889,978 | 910,250 | 513,345 |
| Total Volume Wastewater Treated (billion gallons) | 9.4 | 11.4 | 12.3 |
| % Untreated Due to SSO | 0.009% | 0.008% | 0.004% |
| % Treated | 99.991% | 99.992% | 99.996% |
| Mile of System | 1578 | 1578 | 1578 |
| # SSO/100 Mile System | 7.2 | 8.7 | 7.7 |
>99.99%
WASTERWATER TREATMENT
At Essential, we capture and treat >99.99% of the wastewater from our customers despite challenges arising from heavy storms, hurricanes, clogs, blocks, and contractor strikes during street construction and repair.
Making Infrastructure Investments in Pelham Manor Culpepper, Virginia
Essential has invested in significant infrastructure improvements to the Pelham Manor water system since we first acquired the troubled Culpepper, Virginia water system in 2010.
Since then, we have invested more than $750,000 to upgrade the system, including installing treatment on the system’s wells to remove volatile organic compounds, iron and manganese that plagued the water system for years. We also installed new 5,000 and 10,000-gallon storage tanks, and a larger water main to connect the pump stations and improve pressure and flow for customers.
Doris Brandt, Pelham Manor Resident
"I’ve lived in Pelham Manor since 1961 and ever since I can remember, there were problems with the drinking water. The pressure was always low. Whenever there was a main break, we got mud in the water. I stopped drinking it at least 20 years ago, maybe 30. I bought filters for my water pitcher which were supposed to be changed every other month, but I couldn’t get one to last more than a month. The previous owner of the system would try to fix the problem with chemicals, but that only made the water smell. What we really needed was new pipes.
“With Aqua’s improvements, the water is safe and pressure is good. There’s no more sediment in my pitcher. My daughter lives in England and when she came to visit after the repairs, she noticed a change in the water, particularly the fact that it no longer smelled like chemicals. Now that we have pressure, my son says our home is now his favorite place to shower."
Reducing Water Loss
One of Essential’s primary responsibilities is to manage water resources carefully. We do this in part by identifying ways to reduce water loss. Some of the ways we reduce water loss include:
Our significant investment in water infrastructure has proven to be a very successful way to reduce water main breaks and water loss. For example, in 2000, Essential experienced nearly 25 main breaks per 100 miles of pipe we own in southeastern Pennsylvania, which was within the American Water Works Association’s (AWWA) national acceptable main breakage range. However, since then, we invested more than $2 billion in infrastructure in the same region. As a result, in 2019, we experienced fewer than seven main breaks per 100 miles of pipe in Southeastern Pennsylvania. This not only reduced water loss, but reduced the volume and cost of emergency repairs, reduced service interruptions and improved water service for customers.
Keeping to this commitment, Essential replaced over 130 miles of water pipes in 2019 and plans on replacing 145 miles of water pipes in 2020 to continue to address water loss, as well as improve reliability and service for customers.
Water Main Replacement
| 2019 | 2018 | 2017 | |
|---|---|---|---|
| Main breaks per 100 miles | 20.4 | 18.3 | 15.1 |
Note: This apparent increase is likely the result of better data collection and data quality that we have been working towards in recent years, across each of our states. We believe that, in actuality, there has been a decrease in main breaks across the company and this is true when we look at certain individual state operations, such as our largest state of Pennsylvania. We hope these data improvements will allow for more direct year-on-year comparisons in the future. We believe it is likely that these figures are artificially inflated due to a different definition of “main break” used in some of our operations. We are investigating this matter and working towards a consistent definition across all of our states in line with AWWA guidance.
Non-revenue Real Water Losses
| 2019 | 2018 | 2017 | |
|---|---|---|---|
| Volume (billions of gallons) | 16.8 | 17.7 | 16.1 |
| % of Total Production | 20.0% | 21.1% | 19.4% |
Note: Data is displayed here in both the absolute value of volume as well as a percentage of total production. This normalizes the data and accounts for changes in total water production, or send out, across years. We believe that, due to our acquisition of new water systems over time, and the practical margin of error with measurement equipment in the field, our levels of non-revenue real water loss have remained materially consistent over the past three years.
Non-revenue real water losses represented here include leakage (real losses), apparent losses, (such as theft and meter inaccuracies) and other instances, such as water main flushing and water for emergency fire services. These values are determined based on the difference between water production and water ultimately delivered to customers and billed.
SASB: IF-WU-140a.2
Waste
At Essential, we are committed to minimizing the amount of solid waste produced at our treatment facilities, and ensuring that any waste created is handled responsibly. Because the solid waste produced at our treatment facilities is organic matter, in many cases, it is able to be beneficially reused in farming and land application. The nutrients in the organic solid waste are valuable to crops and can help replenish soil, and therefore can be applied to the land in the place of fertilizer or manure. When it cannot be reused, the waste is sent to a landfill or to be further processed at another facility.
In 2019, Essential produced 61,076 tons of solid waste:
One method of drying wastewater residuals involves incinerating it, which occurs at a few of our Pennsylvania sites. We also utilize methane capture where possible and use the gas to de-water the residual waste. As a result of normal business activities, solid hazardous waste is not generated at Essential. Most of our solid waste is leftover organic residual from our treatment processes. As stated, almost half is beneficially reused.
The chemicals we use are part of our treatment processes and become inert in the final byproduct. Because there is a very limited generation of hazardous waste as part of our operations, we do not have an active hazardous waste management program at an enterprise level. We are, however, working on building better waste management manifests for each of our states, as well as a contractor database to promote vendors’ tracking of this information as well. Any accidental chemical spills or fuel waste from vehicles and generators are remediated following all local, state, and federal environmental rules by certified contractors.
Business Continuity and Emergency Preparedness
Business Continuity Plan
The purpose of our business continuity plan is to keep all our water and wastewater plants and operating facilities online and in compliance with regulatory regulations and requirements. In conjunction with keeping the plants operating, this also promotes appropriate maintenance of distribution systems, uninterrupted water supply and wastewater processing, and the health and welfare of our employees, customers and their families.
The plan covers numerous key areas:
During a major event, such as the COVID-19 pandemic, the president of our water and wastewater business undertakes additional review of the business continuity plan with each state operation to promote the following attributes: the plan is actionable, comprehensive in its response to the unique situation, and easily implemented.
Eastern Seaboard Hurricane Plan
Our Eastern Seaboard Hurricane Plan is applicable to New Jersey, NJ, North Carolina, Pennsylvania and Virginia. The plan document is updated annually.
The purpose of the plan is to aid in the mitigation, preparedness, response, and recovery from hurricane and severe storm conditions that threaten or impact Essential’s community water system (CWS) facilities.
Once a hurricane’s path has been identified, with a probability that is will affect any of our water systems, it is the responsibility of the state presidents, or their designees, to initiate interstate company communication and preparation for the impending hurricane or severe storm. An EPA Hurricane Incident Action Checklist for water utilities is used as a template to assist the states. It includes individual checklists which should be completed for the start of hurricane season, before an impending hurricane, and after a hurricane.
For each state, the plan contains tables with company contacts and phone numbers of key personnel who play a vital role in the planning and response to a hurricane. The document also includes each state’s crisis notification chain of command detailing who needs to be contacted, including local, state, federal and regulatory personnel.
Each state’s larger facilities are also listed. For areas with numerous small systems, the division is listed with the corresponding area manager.
Support equipment inventory, such as generators, is listed for each state with specific details. When mobilizing equipment, it is important that equipment is compatible to the system where it is being sent. This includes:
Local and national contractors and vendors are listed to facilitate appropriate level of coordination prior to any event. Regions are required to contact their local contractors and vendors first, with national contractors and vendors to follow.
The communication section lists the communications manager for each state. Operations works with communications managers when there is a need to release any type of public notification. Additionally, the communications section includes templates for press releases, public notifications, emergency outreach, boil water templates, and other items to facilitate dissemination of information to our customers and community is swift and efficient.
Energy Consumption
The physics of moving vast amounts of water and wastewater through networks of pipes to and from Essential’s plants requires extensive amounts of energy; 82%of the total energy consumption required across our operations is related to drinking water operations and 18%is related to wastewater services. We rely on several different sources of energy for various business activities.
Electricity is our most consumed form of energy and 95% of the electricity we use is needed to operate pumps and treatment equipment at our plants. The remaining 5% is used in our corporate offices. Vehicle fuel is the second largest source of energy for Essential, as we operate a fleet of vehicles for constant physical monitoring of our infrastructure. However, we are increasing the amount of compressed natural gas that we use, as a lower emissions alternative. Natural gas is used to heat our facilities and is our third largest energy source.
Energy Consumption by Source Type
| As a percentage of Total kWh of Energy Consumed |
|
|---|---|
| Electricity (Grid Electric) | 75.7% |
| Electricity (Purchased Wind) | 5.0% |
| Electricity (Onsite Solar)* | 1.0% |
| Motor Gasoline | 11.1% |
| Natural Gas | 5.0% |
| Motor Diesel | 1.5% |
| Compressed Natural Gas | 0.7% |
Note: While Essential consumes the energy generated from onsite solar installations, we sell the associated renewable energy credits in the marketplace.
Our total energy consumption has been relatively consistent over the last three years with increases attributed to acquisitions and the organic growth of our business. In 2019, several developments occurred that will significantly increase our proportion of renewable energy consumption in coming years. Essential has contracted to source 25% of its electricity in Aqua Texas through an offsite solar power purchase agreement (PPA) starting in 2020. We also contracted with a retail power supplier for 100% wind power through Green-e Renewable Energy Certificates beginning in 2022 for our water and wastewater operations in Illinois, New Jersey, Ohio, and Pennsylvania. These states feature deregulated energy markets which allow for this arrangement. Aqua Illinois also entered into onsite solar PPA agreements to build two solar fields totaling 3 megawatts, beginning operation in late 2020 and early 2021 to provide 75% of the power for our Danville water and Manteno wastewater plants. These three initiatives will increase our energy derived from renewables from 5% today to 60% in 2022. In volumetric terms of production, we expect renewable energy usage to cover 62.5% of drinking water and 44.4% of wastewater treated in 2022.
Grid and Renewable Energy as a Percentage of Energy Consumed
| 2019 | 2018 | 2017 | |
|---|---|---|---|
| Energy consumed (MWh total energy consumed) | 383,886 | 389,750 | 367,583 |
| Energy sourced from the grid (percentage grid electricity) | 80.7% | 80.8% | 82% |
| Energy derived from renewables (percentage renewables) | 5% | 5% | 5% |
The above table shows the total amount of energy consumed by Essential. Most of this is electricity sourced from the grid, as displayed in the second row. However, the third row represents our sourcing of 100% wind power through Green-e Renewable Energy Certificates. Excluded from this figure is energy from onsite solar generation, for which we sell renewable energy credits in the marketplace and, thus, do not retain its renewable attributes.
SASB IF-WU-130a.1
Expanding Renewable Energy Generation
In late 2018, Aqua Illinois evaluated and ultimately selected two opportunities for the installation of solar power where suitable land was available next to our water and wastewater plants: a two-megawatt facility at the Danville water treatment plant and a one-megawatt facility at our Manteno wastewater treatment plant. A key driver was the availability of the Illinois Adjustable Block Program which provided for favorable pricing of Renewable Energy Credits (RECs) via 15-year contracts. In Illinois, this allowed solar to be financially competitive with grid power. The overall financial benefit over the 25-year life of the solar field is expected to be over $4 million dollars and these savings will directly benefit our customers via utility rates. Environmentally, this will provide a carbon reduction of 2,800 tonnes CO2e annually, provide the plants about 75% of their annual energy requirement and aid in the plants’ overall resiliency.
One of Essential’s solar installations, under construction, is shown here on the grounds adjacent to our wastewater treatment plant.
This project reinforced the notion that partnership is critical to achieve environmental and societal goals. This was a team effort between the community neighbors, elected officials, zoning boards, our solar developer and impassioned Aqua Illinois staff who all contributed to the completion of the ambitious project. Construction has begun and Essential expects both solar fields to be operational by early 2021. The completion of this project will double Essential’s onsite solar generation.
Energy Intensity
Tracking energy intensity, or measuring energy efficiency from an economical perspective, allows Essential to benchmark operations across our regions and states and compare them to each other and against national metrics. Intensity tracking takes on additional importance with our very diverse network of water systems across eight states, maintaining nearly 1,500 water systems ranging in size from less than 25 to 275,000 connections. While our median water system is 64 connections and economy of scale favors larger systems for single efficiency opportunities, our large number of nearly identical smaller systems provides an opportunity to replicate energy efficient methods across many similar systems.
For drinking water, energy intensity is expressed as kilowatt hours (kWh) of energy usage, from both electricity and natural gas, per 1,000 gallons of water (kgal) produced. This is calculated across all eight states and, in 2019, the company averaged 3.2 kWh/kgal, ranging from 2.4 to 4.4 kWh/kgal across all operations. These energy intensity values are highly dependent on physical factors, which vary not only state to state, but by region and location. The depth and lift required to gather water and the pressure required to pump water across distance and elevation are the most significant factors in energy intensity. Because of our large number of smaller systems, heating pump stations during the winter can often cause the intensity factor to double during the colder months. For wastewater, energy intensity is expressed as kWh of energy usage, from both electricity and natural gas, per kgal of wastewater treated. In 2019, the company averaged 4.8 kWh/kgal.
In 2019, to help managers and operators control and reduce energy consumption, these metrics were made available on a monthly basis throughout the company’s data dashboard. This allows them to understand their locations’ unique energy signature and use this information to improve efficiency. We have already observed considerable efficiency gains, as operators can better identify well systems with higher energy consumption compared to similar Essential systems and enacting measures to address this. Utilizing energy intensity metrics has also identified potential projects for station retrofit to enhance efficiency.
Energy Intensity by Business
(kWh/kgal)
| 2019 | 2018 | 2017 | |
|---|---|---|---|
| Water | 3.2 | 3.3 | 3.2 |
| Wastewater | 4.8 | 5.4 | 6.4 |
Reducing Energy Use
Essential is actively engaged in reducing our energy consumption through energy efficiency projects, including variable-frequency drive motors, eliminating throttle valves and assessing whether equipment is right-sized for optimal energy consumption. For example, more than 50% of the energy consumed at a wastewater treatment plant is typically due to aeration, the process of adding air into wastewater to allow aerobic bio-degradation of pollutants. As aeration is a critical component of the wastewater treatment process, Essential is actively evaluating ways to enhance efficiency. We have opportunities to implement variable speed drive blower motors, which utilize sensors to better manage dissolved oxygen to the optimal level. This approach has been shown to reduce energy consumption by up to 50%. As with our drinking water operations, utilizing energy intensity metrics for our wastewater operations leads to key insights. We are better able to compare system performance to our internal and external benchmarks. Essential is consistently achieving energy reduction at plants ranging from 25% to 50% as we either upgrade existing equipment or completely upgrade or replace plants.
While Essential strives to reduce energy usage and intensity where possible, we consider our options holistically and thoughtfully. For example, there are circumstances when we purposefully increase our consumption of electricity. One such instance is our increased use of ultraviolet light to promote onsite generation of chlorine from salt brine for disinfection purposes. At our Media, Pennsylvania wastewater treatment plant, this system was installed in lieu of chemical treatment with sodium hyperchlorite and sodium bisulfate. While this new process resulted in the plant using 10% more energy, it also displaced the need for nearly 24,000 gallons of chemicals on an annual basis and avoided energy needed in the production and transportation of such chemicals. We estimate that the ultraviolet light process leads to at least 50% fewer carbon emissions compared to the traditional chemical treatment process. This reinforces the notion that economic and environmental goals are often well-aligned, as the installation led to financial savings.
Making Smart Investments to Reduce Energy Consumption
Aeration of wastewater during the treatment process accounts for more than half of energy consumed at most of Essential’s plants. In larger facilities, greater efficiency can be achieved through controlling the amount of aeration required via real-time monitoring instruments, computer controls and variable speed motors. These projects have a high upfront cost but generally feature considerable financial savings over time, in addition to environmental benefits. Historically, it has been much more difficult or not possible to install this technology at our many smaller wastewater treatment plants, meaning opportunities for efficiency gains were less common.
At the small plant in Lake Monticello, Virginia, our state engineer and plant operators tackled this challenge through innovation and creativity. Essential previously acquired the Lake Monticello plant which like many similarly older facilities was not designed with energy efficiency as a focus. Essential’s operators and state engineer pored through historical operating data and, through comprehensive analysis, determined that motors could be downsized, and operational schedules staged to reduce motor horsepower throughout the day. This capacity could then be scaled up when needed. This right-sizing and novel automation solution resulted in a 30% reduction of the plant’s energy consumption. Perhaps more importantly, this project demonstrated across the organization that meaningful impacts can be achieved at smaller facilities when teams innovate, collaborate and approach their work through the lens of sustainability.
Essential’s wastewater treatment plant in Lake Monticello, Virginia
Climate Change and Greenhouse Gas Emissions
Download an overview of our new greenhouse gas emissions reduction plan.Risk Management
Essential understands the urgency of the Paris Agreement and the UN Intergovernmental Panel on Climate Change’s science-based target of limiting the global temperature increase to well below 2 degrees Celsius. Addressing climate change requires a holistic management approach and tracking of our Scope 1, 2 and 3 greenhouse gas (GHG) emissions. Our executive and management teams understand there are two distinct elements of climate change: adaptation and mitigation. Essential is addressing both items and has implemented a robust management system to identify associated risks and opportunities.
Essential defines its climate-related impacts though a model which weights likelihood, cost, magnitude of impact and time horizon. Evaluating exposure to climate-related risks and opportunities over a range of time horizons allows for a strategy for the transition to a low-carbon economy recognized in the Paris Agreement and UN Sustainable Development Goals (SDGs). In conjunction with the Villanova University Sustainable Engineering program, we developed a model to identify risks and opportunities using a STEEP (Sociological, Technological, Economical, Environmental, and Political) analysis method. The model evaluates both internal and external forces on their likelihood of occurrence and then on the magnitude of their impact, time horizon and likelihood. Assumptions were based on the climate scenarios Temperature Rise Below 2 Degrees Celsius (RCP 2.6) and a Business-as-Usual pathway (BAU, RCP 8.5). This method allows for a semi-quantitative method for ranking of risks and opportunities and serves to triage a larger number of implications. The process also allows for implications to be updated and easily re-evaluated on an annual basis. This re-evaluation takes into consideration updates to climate models and the addition of new topics and implications as the businesses and business locations change.
Board and Management Oversight
Essential’s management of climate change matters consists of significant board-level oversight of climate-related issues through various channels and reporting paths to review the risks facing the organization and evaluate our operations with respect to many issues, including the risk factors associated with climate change. Climate-related items are covered under the enterprise risk management (ERM) review conducted by the Risk Mitigation and Investment Policy Committee of the Board and is reported to the full Board at each of its regularly scheduled meetings. Also, there is additional oversight provided by the Audit Committee, which is informed about climate change risks through the Compliance and Disclosure Committees, comprised of the company's management. The chief executive officer (CEO) is also chairman of the board of directors and a member of the risk mitigation and investment policy committee as well as the executive committee. As such, the CEO provides a valuable voice and perspective to board discussions on climate change matters, as he is separately responsible for the overall direction and strategy related to climate issues for operations, and aligning corporate growth with climate-related issues.
Our chief financial officer (CFO) is responsible for monitoring the financial impact of climate-related events and projecting the financial risk of future events for current operations. Further, the CFO is responsible for approval by the board for all capital budget requests including those related to climate change mitigation. Our chief operating officer (COO) is responsible for ensuring physical assets are protected from climate related issues and implementing operational procedures and efficiencies to reduce energy consumption. The COO is also responsible for performing a climate due diligence assessment on future acquisitions and expansion opportunities. The chief environmental officer reports to the COO and downward to each state president and corporate engineering functions to provide the overarching guidance and oversight in managing and evaluating risk through our key performance indicators whichinclude energy intensity. The corporate energy manager is also responsible for energy purchases, including procurement of green energy within those states with deregulated markets and the assessment and implementation of on-site renewable energy projects where feasible.
Greenhouse Gas Emissions
Reducing greenhouse gas (GHG) emissions requires a multi-pronged approach and focusing on the areas where Essential can have the greatest impact as part of an overall long-term mitigation strategy. One such endeavor is to reduce the consumption of energy through efficiency projects. Measuring and managing energy intensity in our operations is a critical component of this. Another pathway is through the expanded use of onsite renewable energy on land adjacent to our facilities. Essential’s approach to addressing our carbon footprint and use of various carbon mitigation options will evolve over time, but it will include additional onsite solar at locations already identified when price parity with grid power can be achieved at the local level. Where this is not feasible, Essential utilizes purchased power agreements for dedicated purchase of energy from specific renewable energy assets. A third avenue for mitigation is purchasing renewable energy offsets via certified credits, with wind power being the most commonly utilized. These are substantive, immediate and meaningful steps in line with the Paris Agreement on climate change and will significantly reduce our carbon footprint.
Essential reports Scope 1 and 2 GHG emissions, which are resultant from energy which is directly consumed, but the impact of secondary emissions, Scope 3, is also notable. Tracking and reducing those emissions comprise an important component of our overall carbon reduction strategy. Our Scope 3 emissions include: pipe replacement activities, purchased chemicals, upstream fuel (electric) emissions not included in Scope 1 & 2, business travel, employee commuting and investments (Limited Liability Corporations without majority ownership).
Pipe replacement activities, which are necessary to address aging infrastructure, are the largest contributor to Scope 3 emissions. The methods and materials used today extend the serviceable usefulness up to 100 years compared to piping installed just 30 years ago, which translates to reduced frequency of pipe replacement over time. Pipe replacement activities also offer an ancillary benefit to our Scope 2 emissions as better and newer piping means less lost water through leaks and main breaks, resulting in a reduction of water that needs to be produced.
Essential’s purchase of chemicals is the second largest source of Scope 3 emissions, but are required for water safety and quality. We have identified opportunities to reduce chemical usage through onsite chorine generation and UV disinfection, which results in an overall increase in our Scope 2 emissions, but a net reduction nonetheless. We also acknowledge that warmer water temperatures brought on by climate change will require Essential to use more chemicals to produce safe drinking water. By tracking GHG impacts from chemical purchases, we are able to better understand the impact of climate change on treatment operations.
Upstream impacts of fuel and energy-related activities of the fuel needed to generate electricity is also a significant element of our Scope 3 emissions. By reducing the amount of electricity consumed and increasing our use of renewables, we can reduce this impact. Other Scope 3 items are not as material, but we maintain awareness of these items nonetheless.
Essential is open and transparent with our approach to climate change adaptation and our verified carbon disclosures, which have been reported though the Carbon Disclosure Project (CDP) since 2018. Please refer to our public submissions for more detail and information surrounding our management of climate change risk. For additional information, see our Task Force on Climate-Related Financial Disclosure (TCFD) Report.
Greenhouse Gas Emissions (Metric Tons C02e)
| 2019 | 2018 | 2017 | |
|---|---|---|---|
| Scope 1 Emissions | 16,057 | 16,304 | 14,383 |
| Scope 2 Emissions (Market-based) | 115,124 | 128,612 | 132,858 |
| Total Scope 1 and 2 emissions (Market-Based) | 131,181 | 144,916 | 147,241 |
| Total Scope 3 emissions | 110,675 | 150,780 | (Not calculated) |
Note: Essential chooses to present Scope 2 emissions using the market-based method, as this approach incorporates the impact of various sourcing decisions, such as our procurement of renewable energy. In contrast, the location-based method reflects the average emissions intensity of grids on which energy consumption occurs. We wish to footnote Essential’s location-based Scope 2 emissions (measured in metric tons CO2e) as follows: 123,639 (2019), 130,997 (2018) and 152,980 (2017). We began calculating Scope 3 emissions in 2018. The reduction in Scope 3 emissions in 2019 was largely the result of updated emissions factors for capital goods.
Breakdown of Scope 3 Emissions
| Metric Tons CO2e | Percentage of Total | |
|---|---|---|
| Capital goods | 37,845 | 34.2% |
| Purchased goods and services | 35,765 | 32.3% |
| Fuel-and-energy-related activities | 28,742 | 26.0% |
| Other (Upstream) | 4,703 | 4.2% |
| Employee Commuting | 2,447 | 2.2% |
| Investments | 1,058 | 1.0% |
| Business Travel | 115 | 0.1% |
| Total Scope 3 emissions | 110,675 | 100% |
Fleet Emissions
Reducing our fleet footprint is an important and effective aspect of our reduction of greenhouse gas emissions.
Essential’s water and wastewater business has a diverse geographical footprint across eight states, covering more than 3,000 square miles of service area across 1,700 locations. Many of the locations require visits from employees daily or several times a week, which requires frequent vehicle usage.
Our fleet is comprised of nearly 1,000 vehicles, ranging from cars to heavy-duty dump trucks. In 2019, Essential’s fleet traveled more than 17 million miles and consumed more than 1.3 million gallons of gasoline, diesel fuel and compressed natural gas.
In 2019, we also improved our fleet’s average diesel mileage by 19% compared to the previous 3-year average, and gasoline mileage improved 5% from the previous 3-year average. Essential is continually investing and upgrading the vehicle fleet. We are planning for the future inclusion of vehicle charging stations at various locations, realizing a meaningful transition to electric vehicles requires the complementary supporting infrastructure for success.
For the foreseeable future, Essential’s heavy-duty vehicles will still require fossil-derived fuel and we are utilizing compressed natural gas (CNG) to reduce the environmental footprint as an alternative to diesel. Since 2013, Essential has expanded its fleet to include 32 heavy duty vehicles and dump trucks that run on CNG. We have also installed several CNG fueling stations to support operations in southeastern Pennsylvania. This investment has not only reduced our fuel cost in comparison to gasoline and diesel, but because natural gas is a lower-carbon, cleaner-burning fuel, switching to CNG has resulted in substantial reductions of hydrocarbon, carbon dioxide, nitrogen dioxide and GHG emissions.
TreeVitalize Watersheds
Since 2005, our Pennsylvania operations have partnered with the Pennsylvania Horticultural Society, local conservation districts and the Pennsylvania Department of Environmental Protection on a program with the ambitious goal of restoring tree canopy in southeast Pennsylvania. The program, called TreeVitalize Watersheds, focuses on reforesting stream corridors and other areas where the trees will help improve water quality.
After 15 years, the program has reached some important milestones. More than 170,000 trees and shrubs have been planted— all by volunteers— to restore upwards of 1,000 acres with native species. These plants help to protect water and habitat quality by stabilizing stream banks, cooling temperatures, soaking up contaminated runoff and recharging groundwater. Among their many benefits, trees also help to reduce air pollution, enhance open space and improve wildlife habitat.
Essential employees plant trees in Pennsylvania.
Geographic illustration of our tree planting projects in southeast Pennsylvania.
Restoring Habitats
Essential is a proud environmental steward, working to preserve, treat and manage water resources for a sustainable future. We play an active role in protecting and restoring land and water habitats, which are essential for biodiversity and source water protection, in the communities we serve and beyond.
Land and Water Stewardship
Essential owns and protects more than 7,600 acres of natural area at more than a dozen locations across our footprint, and many more acres have been given to government entities for permanent protection. Most of this land is forested, which serves to protect the groundwater, streams and rivers we use for drinking water. These areas are strongholds of terrestrial and aquatic habitat to support diverse species, including many at-risk species.
Essential’s reservoir properties are home to nesting bald eagles, great blue herons, redbelly turtles, brook trout and many rare plant species. Our Green Lane Reservoir in Montgomery County, Pennsylvania, serves as a bird sanctuary to protect resident and migrating waterfowl in an Audubon Important Bird Area, where more than 270 bird species have been recorded.
Native freshwater mussels in a “grow basket” at Green Lane Reservoir.
The reservoir is also a rearing site for freshwater mussels to help save these important native species. While we work to keep invasive bivalves like the zebra mussel out of our reservoirs, there are many native species of freshwater mussels that are beneficial to our waterways. As “filter feeders,” mussels help to clean the water, removing sediment, excess nutrients, and harmful algae. An adult mussel can filter 10 gallons of water a day in the summer.
Healthy mussel beds reduce erosion of streams, provide food for other organisms and improve habitat conditions. Unfortunately, 70% of North American mussel species are imperiled due to pollution, loss of fish hosts needed for reproduction and other factors. To help restore mussel populations, and the ecosystem services they provide, Essential has partnered with the Academy of Natural Sciences of Drexel University, the Partnership for the Delaware Estuary and others to help grow native mussels that will be used to re-populate our streams.
Essential is committed to protecting and guiding its properties to retain their ecological value for generations to come, as well as partnering on innovative projects to restore ecosystems.
Investments in Restoration
In order to protect its water sources, Essential invests in and works with community partners to complete on-the-ground restoration projects. From 2005-2019, our Pennsylvania operations invested more than $1.7 million in watershed improvement projects, including tree plantings, stream channel restorations, stormwater management and agricultural improvement projects. Our work to keep pollution out of waterways has protected and created vital habitat while providing countless other benefits to the environment, our customers and upstream communities.
Our Pennsylvania employees weed European water chestnut, an invasive aquatic plant threatening aquatic habitats.
Employees
We owe everything to our employees: the talented people who work tirelessly to fulfill our mission of protecting and providing Earth’s most essential resources to our customers.
In 2019, across our eight-state water and wastewater operations, we employed more than 1,600 people in a variety of roles, ranging from field workers and customer service representatives who are on the front lines working with customers, to scientists and engineers who contribute to Essential’s delivery of reliable water service, to the corporate employees who help execute the strategic vision for our business.
We are dedicated to creating a sustainable working atmosphere by offering a broad array of programs to attract and retain the best employees, including an array of wellness initiatives and comprehensive safety programming. We know that a satisfied employee provides long-term value, dedication, trust and superior performance.
Health and Safety
The safety of Essential employees, customers, and communities is the foundation of our business and what guides all our employees’ actions. Essential continues to invest in safety improvements, implement policies and procedures, develop technical training and guidelines for our employees. Our employees take actions each day to keep themselves, their colleagues, our customers and our communities safe. Our teams make safety a focus on the job, in meetings and our surrounding work environments to treat employee and customer safety with the highest level of concern.
Essential prioritizes safety above efficiency, productivity and profits. Over the past few years, we have revamped our approach and created a national structure aimed at improving and standardizing our safety practices. Recently, we have expanded this program by launching internal processes to close safety gaps, better track and communicate safety performance, and formalize regular communications to share best practices. Key policies and practices have been updated and training re-emphasized to address the current best practices and knowledge. In 2020, we have focused on reporting and case management, development of audits, and incident investigations to correct root causes of injuries across the entire company.
Essential has also increased our number of regular trainings and inspections to help provide safe workplaces, distributed monthly tips to increase safety awareness, conducted ongoing worksite assessments and created a culture of empowerment that encourages employees to stop work in the case of safety concerns.
Safety committees across our water and wastewater footprints have also expanded their reach in recent years. Since 2017, Essential employees have completed more than 61,000 hours of training, which covers Occupational Safety and Health Administration compliance topics, as well as data-informed training that looks at common injuries within the company and provides additional resources to reduce the number of injuries.
As important as it is to identify risks, it is also important to celebrate success and gain feedback from our employees. That is why Essential hosts multiple safety day celebrations across the company, which recognize employees for accomplishments ranging from saving a life on the job to exemplifying safety excellence in their daily lives.
Thanks to these efforts, in 2019 we achieved one of our strongest safety records across numerous metrics.
Essential’s Recent Safety Record
| 2019 | 2018 | 2017 | |
|---|---|---|---|
| Lost Time/Restricted Time Rate (per 200,000 hours worked) | 2.4 | 2.2 | 2.4 |
| Lost Time Incidents (number of incidents) | 9 | 12 | 14 |
| Days Away, Restricted or Transferred (number of incidents) | 36 | 37 | 34 |
| Fatalities | 0 | 0 | 0 |
Ahead of the closing of the Peoples transaction in March, we also created a combined Environmental Health and Safety management position to provide oversight to the gas and water and wastewater businesses. This included the appointment of a National Safety Director charged with developing, coordinating and implementing a combined health and safety program that will continue to incorporate best practices to keep our workers safe. Part of this effort includes a review of the current policies and procedures, evaluation and setting goals and objectives, and implementation plans and schedules.
COVID-19
During the COVID-19 Pandemic, Essential has taken swift action to safeguard the well-being and health of our employees. One-third of our workforce transitioned to work from home very rapidly. For field operations employees required to be physically present to manage and operate our plants and infrastructure, we evaluated and developed new processes and procedures to limit employee interaction where possible. Among other actions, we expanded our cleaning processes and supplied personal protective equipment.
As we learned more about the virus, we engaged in transparent dialogue with all employees through daily huddles, weekly CEO townhalls, and various email communications. These touchpoints and channels allowed for real-time feedback of our efforts, sharing of latest developments and a collective focus on health and safety as the top priority for Essential. Managers throughout our organization were provided training on leading a remote workforce, which has also contributed to open channels of communication and feedback.
Employees were invited to attend an education session with a medical doctor who gave an in-depth overview on COVID-19. We also enhanced medical and childcare leave benefits in the event an employee needed time off for COVID-19 illness or to take care of children during school closures. We also offered telemedicine and telecounseling resources for our employees and their dependents.
Engaging Our Employees
We believe that our success depends on employees understanding how their work contributes to Essential’s overall strategy. We use a variety of communication channels to facilitate open and direct dialogue, including open forums with our executives, weekly town halls, regular engagement surveys, and employee resource groups.
Employees are our most valuable resource. To demonstrate this commitment to our people, we continuously invest in training and development programs for our employees so that they may constantly evolve and grow skills in their areas of expertise. For example, we offer management training to improve supervising skills for union and non-union teams, provide rotational or temporary assignments as development opportunities to challenge our employees in their growth, and managers conduct biannual performance reviews to focus on employee performance and skill development.
Essential also offers tuition reimbursement to all regular, full-time employees. We provide up to $5,250 per calendar year for job related education and/or training courses.
Engagement Surveys
In the first half of 2020, Essential conducted two employee surveys about job satisfaction. Participation in the surveys was high, with nearly 70% of the workforce completing the surveys and 80% of respondents rated overall satisfaction with the company favorably, particularly with support provided during the pandemic. Employees indicated they felt that despite the pandemic, they were able to promote continuity in our services, felt supported from their manager and were clear on the direction of the company and their priorities. These responses were also reflected in the financial, safety and environmental sections of the survey and the results were available real-time to managers to allow them to address local challenges quickly. Essential conducts periodic employee surveys across the organization and will continue to do so at least annually. We are pleased that the results of similar surveys have been relatively consistent across multiple years.
Turnover Rates
| Voluntary Turnover |
Involuntary Turnover |
|
|---|---|---|
| Executive/Sr. Manager Turnover | 0% | 3% |
| Mid-level Manager | 5% | 4% |
| Professional | 5% | 3% |
| All Others | 9% | 4% |
| Total | 8% | 3% |
2019 data displayed in the above table
Wellness Program
Essential knows that employee wellness is critical because studies have shown wellness programs help reduce absenteeism, health care costs and employee turnover, while improving employee morale, strengthening recruitment efforts and enhancing the quality of life for employees.
Essential offers programs to help employees utilize available resources to help make healthy choices easy. We work with employees to fully understand all proactive wellness benefits available to them through our insurance, including smoking cessation, nutrition services and gym memberships.
Through our vendor Health Advocate, employees have access to an interactive website that helps them to reach their wellness goals like eating better, getting fit, reducing stress and managing certain health conditions. Through this website, employees can develop confidential personal health profiles, use online progress trackers and to-do lists to meet their health goals, access self-guided online workshops, participate in interactive competitions and campaigns and access educational tip sheets and recipes.
All employees are also provided regular meetings with a nutritionist as part of their health insurance plan. To improve on this benefit, we arranged for a healthy eating presentation from a nutritionist, followed by optional on-site nutrition meetings in our Bryn Mawr office. We have a recommended list of local nutrition resources in other areas of our operations footprint.
Equal Employment
Essential’s Chief Human Resource Officer (CHRO) serves as our company’s Equal Employment Opportunity Commission (EEOC) Officer and Equal Employment Opportunity (EEO) Manager. The CHRO has the ultimate responsibility for the implementation of EEO programs in compliance with applicable law and is responsible for the day-to-day implementation and monitoring of our EEO policies. As part of that responsibility, the CHRO periodically analyzes Essential’s personnel actions and our efforts to verify compliance with our equal employment policy. While the CHRO is responsible for safeguarding how Essential’s EEO policies are executed, all employees share in this responsibility by ensuring that their personal actions abide by these policies.
All employees, regardless of their position, are covered by and are expected to comply with this policy and to take appropriate measures to ensure that prohibited conduct does not occur. Appropriate disciplinary action will be taken against any employee who violates this policy. Depending upon the seriousness of the offense, disciplinary action, up to and including termination of employment, may be taken.
Our Equal Employment Opportunity and Anti-Harassment Policy is located here.
Diversity and Inclusion
Essential is dedicated to creating a sustainable working atmosphere to attract and retain the best employees. We are committed to diversity, building a culture of inclusion, supporting employee wellness and facilitating a strong corporate culture where safety is paramount.
Diversity of backgrounds, ideas, thoughts, and experiences is essential to our culture and the way we do business. Creating an environment where our differences are valued and where every person feels a sense of belonging and engagement supports a thriving organization that cares about our customers. In 2019 and 2020, unconscious bias workshops and action planning sessions were held for all employees across our company footprint in order to improve the dialogue and build on an inclusive culture. These workshops explored the perspectives and pre-conceived notions individuals bring to work each day that impact others. These engagement sessions will continue to further build a more inclusive workforce.
Diversifying our workforce continues to be a focus at all levels of the company. We have a range of diverse recruitment tactics supported through diversity associations and job boards for minorities, veterans and women engineers, and we also recruit new talent from local community colleges and city-based universities. Essential hosts Black and Women’s Employee Resource groups to help ensure our employees feel supported in their professional growth at all levels. Since 2015, the minority population of the workforce has grown from 17% to 22% and diversity at the management team has grown, with 29% of the management team comprised of minorities and women.
At the board of directors level, Essential was named as a winning “W” Company by 2020 Women on Boards and received the Forum of Executive Women’s Advancing Women Company Award in 2019. More than 55% of the board is diverse, including 33% female directors.
Gender Diversity
| Men | Women | |
|---|---|---|
| Executive/Sr. Manager Gender | 72% | 28% |
| Mid-level Manager Gender | 78% | 22% |
| Professional Gender | 50% | 50% |
| Total Company Gender | 74% | 26% |
| Industry Gender | 81% | 19% |
Age Diversity
| >50 | 30-50 | <30 | |
|---|---|---|---|
| Board | 88.9% | 11.1% | 0% |
| Management | 52.1% | 45.4% | 2.5% |
| All Employees | 42.3% | 45.4% | 12.3% |
Water Affordability and Access
Essential recognizes that providing safe and reliable water and wastewater service at reasonable rates is a fundamental tenant of our mission. In order to do this, we strive every day to operate efficiently, encourage water conservation and prudently invest in aging infrastructure. However, even with planning and conservation practices, there are low income customers in our community who have difficulty paying their bill. These issues occur in any area, regardless of the location, demographic or income distribution. In addition, a variety of issues can impact a customer bill including the condition of the infrastructure and work that has been done in the system, ability to utilize single tariff pricing, weather, irrigation, household usage or the potential of a leak. Generally, the cost of providing water service is a main driving factor behind water rates which impacts the cost of service and customer bill.
Essential works proactively with customers that have difficulty paying their bill including offering payment plans, recommending conservation tips, and in some instances, adjusting a bill if a customer has had a leak. Also, in several states, we locally operate low-income assistance programs. For example, Helping Hand in Pennsylvania is a low-income assistance program designed to enable manageable monthly payments. Customers who make timely payments through Helping Hand receive a monthly credit to their accounts. The program also provides customers with water conservation kits that offers customers information and tools for how to use less water. Aqua Aid is a similar program operated in Illinois and New Jersey through partnership with Salvation Army and NJ SHARES.
SASB: IF-WU-240a.4
Customer Experience
Essential is always focused on improving the customer experience. Our capital investments are designed to enhance our customers’ experience with our services and facilitate smooth interactions with our utilities. In 2019, we made numerous enhancements to our website and billing platforms in order to provide timely information on usage and billing for our customers. We expanded our payment methods and e-billing efforts for customer convenience, as well as to promote environmentally focused paper reduction.
We continue to learn by monitoring industry best practices and gathering customer feedback following service interactions, and through external surveys to address pain points to help streamline the customer experience and anticipate future customer needs.
In 2019, we embarked on a customer engagement project to better understand how our customers would like to be served. Our project is an investment in measuring customer experience at every touchpoint along the customer journey to establish baselines for measuring future performance. Our research will help better predict and prioritize customer needs and trends, identify key engagement and experience drivers and enable us to build a customer service program that promotes a consistent, high-quality experience with Essential.
In conjunction with our customer engagement project, we participated in several J.D. Power customer satisfaction reports which provide industry standards in customer satisfaction. During 2019, we performed in the top 25 percentile in the Northeast and South regions and in the top 30 percentile in the Midwest Region in the 2019 J.D. Power customer satisfaction study. In addition, we were awarded Top Brands across all our water and wastewater operating regions for maintaining infrastructure and Top Brands in customer notifications and alerts in the Southern region.
Customer Education
Essential proactively shares information with our customers to enhance their experience and provide additional information on topics that help them save money and conserve water. These include tips on properly disposing of fats, oils and grease during the holidays to prevent clogs, water conservation tips and how to prevent the occurrence of frozen pipes during cold months. We share this content through our customer mailers and our social media properties including Facebook and Twitter. We also created an interactive and educational website for our customers to learn about sustainable and efficient practices they can implement in their homes.
We also provide WaterSmart alerts, an automated customer notification designed for quick, reliable communications on a customer’s water safety and service in case of disruption.
Our Community
Charitable Giving
Essential’s 2020 budget includes approximately $4.4 million allocated for non-profit organizations.
Charitable Trust
Essential has a charitable trust with the mission to improve the quality of life of our customers and communities with focus on nonprofit organizations in our company footprint. We seek to engage in collaborations that result in measurable success for the communities we serve in areas, but not limited to, the environment, education, water and wastewater projects, emergency services, community and economic development. Historically, the trust has given approximately $500,000 each year to nonprofit organizations.
Employee Volunteerism
We recognize that volunteer service is as critical to community organizations as it is to our employees. As a mission-based organization, volunteerism allows us to expand corporate social responsibility activities by enabling employees to attend company-sponsored volunteer events at local community organizations. It is an opportunity for employees from different sectors of the company to engage with one another and encourage conversation and dialogue. The ripple effect of volunteerism within our culture cultivates and encourages collaboration and teamwork and fosters an environment where employees feel inspired to play an integral role in making a positive impact in their region. Essential-paid volunteer time supports volunteer activities including Habitat for Humanity, food banks, stream clean up, veterans activities, installing fire alarms, organizing essential items for children, United Way programs and reading to children. Employees report volunteer hours for tracking purposes throughout the organization. In 2019, Essential employees tracked more than 1,000 hours of paid volunteer time.
Supply Chain
In 2019, we made almost $600 million of purchases related to our water and wastewater business, more than half of which was with suppliers from within the states we operate. We are proud that many of these are small businesses with long-standing histories and roots in the neighborhoods we serve. Being good stewards of community natural resources aligns with being good community partners, because water is a local resource and so is the community that supports the infrastructure. We recognize that, in many cases, our customers are also our suppliers and vendors. These multifaceted and deep connections between Essential and our fellow community members enrich and strengthen neighborhoods, as well as develop a more resilient local economy.
Supplier Diversity
In addition to our efforts to maximize business with vendors local to the communities we serve, Essential is committed to increasing our work with qualified and certified diverse suppliers, which are measured by majority of ownership and control, and include one or more of the following classifications:
To be certified as diverse, the supplier must have a valid and current certification from one of the following:
Essential believes that supplier diversity is critical for our communities as well as for our business. We want to source from and partner with businesses owned by individuals representative of the diverse communities and neighborhoods where we live, work, and operate each day. This also enriches and strengthens local economies, increases sourcing options, and fosters collaboration and innovation.
We have taken various steps internally to increase our work with diverse suppliers in the procurement process, including regular review of purchase requisitions to expand the use of diverse vendors, updating our internal purchasing website to encourage greater use of qualified diverse suppliers, working with a leading provider of supplier diversity data and enhancing reporting to better recognize our work with such suppliers.
Externally, we encourage diverse suppliers to register and become certified in their state to apply for every applicable opportunity, and we reference a commitment to diversity in our supplier code of conduct. The Essential purchasing department is a member of the National Minority Supplier Development Council, Women's Business Enterprise National Council, Women's Business Enterprise Center East, and Women's Business Development Center. We regularly participate in networking events and follow-up meetings to learn from companies with mature supplier diversity programs.
In 2019, we spent $55 million with diverse suppliers, representing 9.2% of our controllable spend. This is a large increase over our 2018 figure of $24 million, or 4.5% of our controllable spend. This growth was driven primarily by a significant supplier of infrastructure becoming certified as a Veteran-owned Business Enterprise. When calculating the percentage of our spend with diverse suppliers, we measure in controllable spend, which excludes spend where there is no opportunity to include diverse suppliers or cannot be sourced to a diverse supplier due to policy or law (items like power, purchased water and some one-time payments). In 2019, Essential’s controllable spend was $597 million.
Supplier Code of Conduct
Essential has established a supplier code of conduct to define the basic requirements for suppliers of goods and services and their responsibilities to the environment and their stakeholders.
We are committed to purchasing from suppliers that strive to improve the environmental quality of our water and wastewater operations, and that use reasonable efforts to minimize pollution and improve environmental protection and sustainability.
Our suppliers are also responsible for the health and safety of their employees, which includes controlling exposure to hazards, taking reasonable efforts and precautionary measures against accidents and occupational hazards, providing education and training in health and safety issues and having reasonable health and safety management systems. We also expect suppliers to subscribe to the principles of nondiscrimination, follow high standards of business ethics and professional conduct and adhere to our Human Rights Policy.
Essential completed a risk assessment in 2019 for suppliers that we had spent more than $50,000 with in the final six months of 2018. This supplier screening, conducted by a third party, was designed to verify that suppliers meet all Essential standards for credit reporting, W-9, a global risk assessment, ratification of our supplier code of conduct and proof of insurance. We also identify, encourage and assist vendors that may qualify for diversity certification.
Our Supplier Code of Conduct can be found here.
Board Composition
Our Chief Executive Officer is also chairman of the board. The board of directors deliberately and intentionally determined that this structure of the combined chairman and CEO, along with the position of a strong lead independent director and independent committee chairs, to be the most appropriate and efficient approach to managing the company, while providing clear accountability to the execution of Essential’s strategy and results. The lead independent director is elected annually and maintains special responsibilities and authorities to share leadership of the board with the chairman. These are listed in our Proxy Statement.
Under our bylaws, the board of directors may designate an executive committee and one or more other committees, with each committee consisting of two or more directors, except for the audit committee and executive compensation committee, which each must have at least three members. The board of directors annually elects from its members the executive, audit, executive compensation, risk mitigation and investment policy, and corporate governance committees. The board may also appoint ad hoc committees. The retirement and employee benefits committee, which is comprised of senior management from Essential, reports periodically to the board of directors.
We strongly believe that board diversity is extremely important for many reasons. When assessing a candidate, consideration will be given to the effect such candidate will have on the diversity of the board. Diversity of the board is evaluated by considering a broad range of attributes, including, without limitation, race, gender and national origin, background, demographics, expertise and experience. Essential Utilities is proud to qualify as a Winning 'W' Company by 2020 Women on Boards. The organization recognizes companies that have 20% or more board of directors seats held by women. Three out of nine members of the Essential board of directors are women.
Each year, the directors complete a targeted questionnaire that is administered by a neutral, non-affiliated entity to assess the performance of the board and each of the standing committees. Every second year, directors complete a targeted questionnaire to assess the performance of the directors individually. Both questionnaires elicit quantitative and qualitative ratings in key areas of board operation and function. Each committee member completes questions to evaluate how well the committees on which he or she serves are functioning and to provide suggestions for improvement. In 2019, the lead independent director and the chairman met with each director, provided the results of the evaluations to each director and discussed the director’s participation, preparation, and performance.
In 2015, the board of directors undertook a multi-year program aimed at refreshing the board to encourage new ideas, expertise and oversight while maintaining the institutional experience of the then-current directors. As a result, the board of directors now consists of nine directors, with seven of those directors having been hired since 2015. Each of these directors brings his or her own level of expertise and experience. The board of directors is responsible for determining whether each of the directors is independent. The board has adopted corporate governance guidelines that contain categorical standards of director independence that are consistent with the listing standards of the NYSE. Seven of our nine directors are independent.
Some key statistics about our board’s composition are below:
60.6
AVERAGE AGE OF DIRECTORS
33.3%
GENDER DIVERSITY
55.6%
TOTAL DIVERSITY
77.8%
INDEPENDENCE
6.2 YRS
AVERAGE TENURE
Commitment to Human Rights
Essential Utilities is deeply committed to human rights and this care spans across our operations and through all our activities. We recognize the influence and importance our business has on many stakeholders. We strive to consider and address the impacts our operations have on each of these groups and promote universal human rights in all our practices. Our board of directors is responsible for overseeing human rights risk management and our management team is accountable to the board for ensuring our Human Rights Policy is effectively implemented. All employees are urged to consider promotion of human rights in their roles and are expected to be strong ethical community partners. Further, our commitment applies to all suppliers and vendors without exception and is independent of what governments may or may not require.
As our policy states, we make the following commitments to minimize risk and adverse effects of our operations:
While minimizing and mitigating risk is vitally important, we also believe our operations play a constructive role in both safeguarding and expanding opportunity for human rights development. This is an inherent responsibility of Essential as a supplier of water for our communities, and directly connected to UN Sustainable Development Goal 6, which calls for the “availability and sustainable management of water and sanitation for all.” Our Human Right to Water Policy makes clear our commitment to providing a reliable supply of safe, clean, affordable and accessible water in accordance with regulations at rates established by governing public utility commissions.
We acknowledge our responsibility to customers while also fulfilling our responsibility to sustainable and resilient communities by investing in our nation’s water infrastructure and protecting water sources and local environments. Coordination of all these activities helps safeguard every human’s right to water. We agree with the November 2002 resolution of the United Nations Committee on Economic, Social and Cultural Rights which both calls for a human right to water and acknowledges this as a “prerequisite for the realization of other rights.” We can never take this right for granted and must continually invest in our water infrastructure for future generations.
Board Oversight of ESG
The board of directors is briefed on ESG matters in its regularly scheduled meetings, through various channels and reporting paths. Related risks are covered under the enterprise risk management (ERM) review conducted by the risk mitigation and investment policy committee of the board and reported to the full board at each of its regularly scheduled meetings. At least five times a year, our general counsel provides a report on the progress of the ERM program. Also, there is additional oversight provided by the audit committee, which is informed about ESG-related risks through the compliance and disclosure committees, comprised of the Essential's management. Annually, the CEO formally presents to the board on ESG matters. During this detailed review, there is analysis and discussion of environmental initiatives, strategies and progress towards related goals. These matters are discussed both in terms of impact to current operations as well as through the lens of future plans of acquisition and expansion opportunities. At least five times per year, the chief of staff, who reports to the CEO and oversees the ESG program, presents a brief update to the board on ESG matters.
Separately, the corporate governance committee is charged with various governance oversight including, but not limited to, identifying and considering qualified nominees for directors, developing and periodically reviewing the corporate governance guidelines, succession planning, implementing and overseeing a comprehensive peer review process and overseeing related person transactions.
The CEO is also a member of the risk mitigation and investment policy committee as well as the Executive Committee. As such, the CEO provides a valuable voice and perspective to board discussions on ESG matters, as he is separately tasked with the responsibility for the overall direction and strategy related to ESG for operations and aligning corporate growth with consideration of these issues. This arrangement serves as a crucial bridge between the board and our company’s management with respect to ESG.
One illustration of hands-on board oversight of ESG is exemplified by the entity’s involvement with cybersecurity management. By receiving at least quarterly reports, the board of directors and the risk mitigation and investment policy committee help ensure that Essential is devoting the appropriate amount of resources to prevent a cybersecurity breach and that there is a clear response plan in the event of a breach. The board annually reviews and approves the capital and operating budgets, ultimately reviewing and approving the amount of spending that the company is to spend on cyber security measures.
More information on our board’s structure and governance of ESG can be found in the Investor Relations section of our website.
Executive Team Role in Managing ESG
Flowing from governance of ESG by the board of directors, the management of Essential Utilities is responsible for designing, implementing, reporting, and executing a strong and comprehensive program. It is the expectation that every member of the executive management team understands the principles and importance of ESG, is aware of latest developments and trends in their area, identifies relevant risks and opportunities, and continually seeks creative means by which to foster innovation and contribution to the overall development of the Essential ESG profile. Further, this orientation and focus is disseminated through the organization and we seek to build company culture around an inherent regard for our communities and environment, in line with our corporate mission and purpose.
Our CEO is responsible for the overall direction and strategy related to ESG issues for operations and aligning corporate growth with consideration of such issues. Further, the CEO is the most direct interface with current and future investors in addressing our company's alignment with ESG goals. As such, the CEO provides a valuable voice and perspective and serves as a crucial bridge between the board and our management to facilitate alignment.
In May 2020, Essential Utilities hired an ESG manager, a new full-time role that reports to the chief of staff and is completely dedicated to further developing and maturing the ESG profile of our company. This reflects a larger effort to re-commit our focus to ESG and accelerate efforts to expand and strengthen our program. The ESG manager oversees the reporting process, works towards increasing our level of disclosure, monitors latest trends and emerging best practices, supports existing projects and helps develop new initiatives so that we can continue to grow as a recognized ESG leader within the utilities industry. The ESG manager and CEO meet monthly to review and discuss ESG matters.
Additional management oversight of ESG is provided by the ESG oversight committee, which was formalized in 2020. Members of this group are the ESG manager, chief of staff, general counsel, chief environmental officer, and chief human resources officer, but we are currently assessing opportunity to expand membership. This group meets at least once per quarter to discuss recent progress with ESG initiatives, strategic short and long-term planning, approval of various initiatives and policies and to recommend matters to be presented to the CEO and the board.
As previously mentioned, there are many leaders and team members across the organization that contribute to Essential’s ESG profile and program in some way. Most notably, the corporate energy manager for our water and wastewater business is responsible for energy purchases, including the procurement of green energy within those states with deregulated markets and the assessment and implementation of on-site renewable energy projects where feasible. This individual is also responsible for tracking greenhouse gas emissions and energy intensity for production targets. The vice president of fleet operations, reporting up through the chief administrative officer to the CEO, is responsible for managing the large fleet of vehicles across the entire enterprise and implementing efficiency initiatives that reduce emissions and climate impact.
Our management team is provided financial incentives for successful management of a variety of ESG factors including, but not limited to, customer service and water and wastewater quality and service compliance. We believe our incentive program plays an effective role in driving performance improvement in ESG.
Code of Conduct
Essential’s Code of Ethical Business Conduct reinforces the company’s longstanding tenet for doing business with integrity and in accordance with its core values and ethical standards. The Code emphasizes that maintaining this level of integrity depends upon the conduct of all employees, adherence to our core values and commitment to acting in a safe, legal and ethical manner at all times.
The Code provides specific rules and concrete examples concerning ethical business conduct, but also emphasizes these should be viewed expansively and be broadly applied to business conduct. It encourages employees to discuss potential ethical issues with their supervisors and prohibits any retaliation for raising good faith questions about ethical conduct. Employees may raise ethical issues with the company’s chief compliance officer, any manager or members of the board of directors or the board’s audit committee. A process for making an anonymous report is also provided, with options to file by phone or online through a third-party site. Confidential and anonymous reporting is available 24 hours a day, seven days a week.
While the board of directors has overall responsibility for ensuring ethical business conduct, the chief compliance officer is charged with implementing and enforcing the Code. However, all officers and managers accept responsibility for enforcing and communicating about the Code and are subject to disciplinary action for violations either personally or by employees under their management. Reports are investigated by the chief compliance officer, the audit committee or the full board of directors depending upon the nature of the matter.
Employees are required to complete annual training about the Code via interactive web programming. Upon completion of the training, each employee must demonstrate a proficiency level by answering a series of questions about the Code’s requirements and their applications to business situations.
The Code specifically addresses the following topics regarding conduct within the company:
Public Policy Participation
We take seriously our role in the public policy process. At our disposal are various outlets through which we can participate. Essential engages in lobbying activities and trade associations in order to educate and address issues impacting our service. In addition, our management team can participate in Essential’s H2O Political Action Committee (PAC). Transparency is critical to building trust in political activities. All PAC and lobbying expenditures are reported in accordance with federal, state and local laws. For further information, please refer to our Political Spending Policy.
Data Security and Privacy
Essential is committed to the safe, secure and reliable operation of its information technology and operations technology systems. Essential has a robust and long-standing cybersecurity program, which is aligned to the National Institute of Standards and Technology (NIST) Cybersecurity Framework.
As cybersecurity threats continue to evolve and increase in both sophistication as well as complexity, the Essential strategy has been to operate utilizing a risk-based approach and continuous improvement through the following methods:
Governance
The information security and cybersecurity program is overseen by a diverse and cross-functional committee of senior business leaders. This committee meets bimonthly and is charged with ensuring that cyber risk is managed and that the program is aligned to business goals and objectives. Updates are also provided to the board’s risk committee quarterly and the full board once a year.
Risk Management
The information security organization is responsible for ongoing vulnerability assessments and threat analysis to essential assets such as customer and employee data, critical business systems, and industrial control environments. Risk assessments are executed on a quarterly basis in conjunction with a third party to promote objectivity. Information security and cybersecurity risk management functions are also integrated into the enterprise risk management program.
Controls, Policy & Compliance
Essential has implemented enterprise-wide security policies, standards and controls that incorporate best practices in security engineering, technology architecture and data protection, which support regulatory compliance. The information security controls framework has been developed around the NIST Cybersecurity Framework but also incorporates best practices from ISO 27001 Information Security Management Systems, CIS Critical Security Controls and ISA 99 Industrial Automation and Control Systems Security.
Awareness, Training & Assessment
Essential has created a corporate culture that is conscious of cybersecurity, with a focus on continual assessment, development and improvement. Specialized programs have been implemented, such as enterprise-wide communications, presentations, phishing simulations and focused training for specific roles. We are currently developing a general cybersecurity training required for all employees and expect to launch this program within the next year.