Majority of FTSE 100 firms not reporting on climate change risks

Almost two-thirds of FTSE 100 companies are "doing their shareholders a disservice" by not reporting on the risk of climate change in their annual reports, according to new research.

Sustainability consultancy Carbon Clear’s annual study, published today (26 September), shows that just 39 FTSE 100 firms recorded climate change as a risk to their businesses in their annual reports last year. Meanwhile, only 48% FTSE 100 are aligned to the United Nations’ Sustainable Development Goals (SDGs), a much lower proportion than the index’s French and Spanish counterparts.

Carbon Clear chief executive Mark Chadwick said: “The FTSE 100 features some of the world’s most innovative and progressive companies in terms of addressing the challenges of climate change. 

“However, the majority are doing their shareholders a disservice by not reporting its risks. More needs to be done and companies across the UK should be committing themselves to ever more robust sustainability strategies that can help to future proof and protect their businesses.”

Best practice

Chadwick was keen to stress that results were not about “doomsaying”, with the report highlighting many successes over the past year. Indeed, the number of companies actively reporting climate change as a risk rose by 13 from last year, while the number of firms assessing supply chain risks doubled.

The report found that year-on-year emissions reductions have been achieved by 67 out of the 70 FTSE companies that have set carbon reduction targets. Moreover, the number of FTSE firms generating power through onsite renewable technologies has risen by 11% in the past two years.

In terms of the highest performing companies, BT Group, Kingfisher and Unilever all placed just behind Marks & Spencer (M&S), with the retailer praised for the success of its Plan A programme which has helped to save £750m in costs through sustainability efficiencies.

“The best practice exemplified by M&S and other companies ranked highly by our report, demonstrate how such programmes can become cost-effective and even cost-positive, affecting change not only throughout their businesses and across their supply chain but with their customers as well,” Chadwick said.

Commenting on his company’s top spot in the rankings, M&S director of sustainable business Mike Barry said: “We’ve made great progress over the last ten years against our commitments to make our products, stores and supply chains better for people, planet and communities.

“We’re proud of what we have achieved and delighted to be recognised in Carbon Clear’s report, however we agree that there is much more to be done and that businesses need to collaborate more in order to drive industry-wide change.”

The research highlights a big disparity in sector performance for sustainability reporting – while retailers and property development companies scored a sector average of 61%, the engineering and construction sectors only averaged scores of 28% and 39% respectively. These poor performances are attributed to heavy industries grappling with more fundamental sustainability issues across their businesses.

Financial disclosures 

The desire for better climate-related disclosure has been driven by the recent issuance of recommendations by the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD).

The TCFD is a voluntary framework to align climate-related risks with financial filings. Fortunately, more than 100 businesses including Unilever, Barclays and HSBC, have publicly committed to support the final recommendations.

However, it is believed that $93trn of investment is required by 2030 to limit global warming to two degrees in line with the Paris Agreement. More than 100 investors with $1.8trn under management have written to the chief executives of 60 of the world’s largest banks, including HSBC and Bank of America, calling for better disclosure and implementation on climate risks in their investment portfolios.

George Ogleby

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