Corporates ignore reporting guidelines

Binding Government guidelines setting out how businesses should publish their environmental performance, and what exactly they should report on, have been largely ignored by some of the leading companies in the UK.

Research carried out by Trucost on behalf of the Environment Agency showed that 84 of the first 100 FTSE listed companies to report as required under the EU’s Account Modernisation Directive business review did not disclose their environmental performance.

This is despite the fact that the new Company Law states that all those companies listed on the index must disclose environmental key performance indicators where relevant.

The report, under discussion at the Environment Agency’s annual conference in London this week, concludes that while many companies are at least paying lip service to the environment – 96% of them made references to it in their reports, compared with 89% in 2004 – the reporting is of low quality and little use to investors.

“Much of the reporting is still at a basic level, with 16% of companies making disclosures in accordance with government guidance and providing a quantitative figure. Although this figure represents an increase in the level of quantified disclosures there are still too few quantified disclosures to make meaningful comparisons between the environmental performance of companies,” said Environment Agency chief executive, Barbara Young.

“These figures indicate confusion surrounding legislation in this area which now requires environmental impacts to be reported using quantitative measures where necessary, as found in Defra’s reporting guidelines.

“Defra has published guidelines on how companies should report environmental impacts, including greenhouse emissions, in order to promote a standard calculation method and to ensure consistent reporting. This guidance underwent extensive consultation with companies, investors, trade associations and other government departments and agencies prior to its launch in January 2006.”

Waste is the most widely reported environmental issue with 67 percent of companies mentioning it. Climate change and energy use were mentioned by 61 percent of companies and water by 38 percent of companies.

Fifteen companies disclosed CO2 emissions in absolute levels and 37 give some figures for energy.

Five companies report on all environmental issues in quantitative terms, these were Emap PLC, Johnson Matthey PLC, Invensys PLC, Scottish Power PLC and Scottish and Southern Energy PLC.

Only six companies linked environmental issues to financial performance or shareholder value.

Due to the lack of companies producing detailed reports on their environmental performance, making comparisons that might inform investment choices is close to impossible.

“There has been some increase in the quantity of companies reporting on the environment. However the quality and usefulness of the data provided is still questionable,” said chief executive of Trucost , Simon Thomas.

“It is hard to see how investors and other stakeholders can use these disclosures to make informed decisions about how companies are managing their environmental impacts and risk. It is important to stress that the Company Law Act now requires companies to report on these matters and there are government guidelines which make it easy for companies to identify important and relevant impacts to their business and report it.”

Sam Bond

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