Blue chips reap benefits of mandatory carbon reporting

As many as 85% of the FTSE 100 companies included greenhouse gas (GHG) emissions in their 2014 directors reports thanks to new legislation, according to a report by management consultants Carbon Clear.

That signals a 51% increase in the last year, driven by new regulations brought into force in October 2013; requiring quoted companies to state their GHG emissions in their directors’ report.

In its annual ranking of the carbon reporting performance of FTSE 100 companies, Carbon Clear says this newfound transparency ‘demonstrates the positive impact that compliance can have on those companies who have yet to engage with climate change and carbon reporting; they are forced to take action’.

In fact, the consultancy firm suggests that the 85% compliance rate would likely rise even higher because company data was collected in June and July, meaning some firms have not yet reached their year-end date.

Energy efficiency

The application of mandatory GHG reporting appears to have had the biggest impact on the FTSE 100 companies that score poorly in Carbon Clear’s ranking. For example, the lowest ten scoring companies averaged a score of 20% in 2014, compared to an average of 17% in 2013. Seven companies in the bottom 10 of the ranking reported their carbon footprint in their annual report compared to one in 2013

The report praises another piece of Government legislation; the Energy Savings Opportunity Scheme (ESOS), which requires large companies (more than 250 employees, or £39m turnover) to carry out energy audits across their operations.

“ESOS is an opportunity for companies to reduce energy use, cut carbon emissions and save money through auditing their current usage and putting into place an effective plan for reducing consumption,” reads the report.

It cites Sainsbury’s as an example, as the supermarket chain reduced carbon emission by 2.4% this year thanks to a major LED lighting retrofit programme in both stores and depots.

Mind the gap

However, Carbon Clear chief executive Mark Chadwick believes that legislation is only part of the solution to reducing emissions.

“For the fourth year in a row our research demonstrates that although many FTSE 100 companies report information about carbon, there’s an increasing gap between the best practice leaders and other businesses,” said Chadwick

“Legislation plays a role in closing that gap, but it’s important that more companies take action on managing their emissions. Businesses have an essential role to play in ensuring a transition to a low carbon economy and BT and M&S are leading the way in demonstrating how this can be achieved.”

Carbon Clear’s report also highlights the growing interest in industry collaboration to tackle climate change. Fifty-seven companies showed evidence of collaboration on climate change issues compared to 41 companies in 2013.

Top performers

The report is based on a ranking and assessment of best practice carbon reporting processes of FTSE 100 companies.

M&S topped the list for a third straight year, sharing first place with BT. Unilever, Tui Travel and Sainsbury’s complete the top five.

Both first place companies achieved a score of 85% in the rankings, however their specialisms as best practice leaders for reporting varied. M&S impressed through its range of engagement activities and scored well for offsetting emissions, while BT excelled in using climate change science to develop reduction targets.

The top 20: –

Brad Allen

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