Environmental impact becoming increasingly important in the City

For the first time, participants in the index were asked which areas of environmental risk they judged to be most relevant to their operations. Third most popular in the City was ‘indirect’ impact through actively managing their portfolios to reduce exposure to environmental risk.

Eight companies – 27% of financials companies, which includes banks and life assurance organisations – selected this impact. The findings back BiE research published earlier this month, which showed that a high placing in the BiE index could mean a less volatile share price and therefore lower cost of capital. The indicators selected by the more environmentally-focused waste recycling sector were biodiversity and electricity generation from landfill gas.

In the index rankings, new entrant Lattice – the gas network business – tied for first place with IBM and ScottishPower. This group was followed by Shields Environmental and Unilever in equal second place. Top new entrants after Lattice were Jaguar, Innogy Holdings, Volkswagen and GlaxoSmithKline. Dow Chemical, also a new entrant, achieved first place in the Chemicals sector.

Other entrants mentioned in BiE’s credits include Ford Motor Company, close behind Jaguar and Volkswagen, Pfizer, close to GSK, and Manchester United, which is the first football club to enter the environment league.

The winners of BiE’s categories are:

• Resources – BP;
• Basic Industries – Blue Circle Industries UK;
• General Industrials – ABB;
• Cyclical Consumer Goods – Jaguar;
• Non-cyclical Consumer Goods – Unilever;
• Cyclical services – Shields Environmental;
• Non-cyclical Services – Sainsbury’s;
• Utilities – Lattice Group;
• Financials – Cooperative Bank;
• Information Technology – IBM; and
• Professional Services – PriceWaterhouseCoopers.

Again, participation in the index has increased, to 206, 83 of these being in the FTSE 100. A further four FTSE 100 companies – Capita, Compass, London Electricity and Pearson – all intend to enter next year. This makes the total market capitalisation of the participants 83% of the FTSE 350, at around £1,000 billion.

Other highlights of the index was the performance of Marks & Spencer, up 94 places to 14th. However, companies are still turning in a mediocre performance on global warming, where, although performance has improved slightly, 45 companies – 22% of the participants – are still not setting any targets. One in four companies could not demonstrate any improvement over the past year or longer. BiE’s work also showed that just 57 companies had verified and auditable data on their global warming or energy and transport impact.

Supply chain management remains a problematic area, BiE reports. Low-scoring sectors include Chemicals and Steel, both of which have high potential risk factors in this area. In the professional services sector, which last year had just three participants – Ernst & Young, KPMG and Oscar Faber – entrants doubled, with PricewaterhouseCoopers, Deloitte and Touche, and Accenture all joining. Strangely, the BiE index found that although this group contains some of the world’s leading audit firms, their score for auditing – covering how they audit their own environmental management systems – was the third lowest of all the sectors covered by the index.

The BiE survey focuses on two areas: environmental management and performance, and uses various indicators to score overall performance. For the ‘environmental management’ section the indicators include whether a company has written policies, objectives and targets, an environmental management system and a programme that involves its suppliers in the environmental management process. In the ‘performance’ section, companies report on two main impact areas – global warming (or energy and transport) and waste.