Select Committee on Environmental Audit Minutes of Evidence

Examination of Witnesses (Questions 140 - 159)



  140. Are you saying there is no difference?
  (Mr Adams) No. A finance researcher can easily take a sample of companies that have got environmental management systems and environmental reports and match them with companies that do not, and then compare their share price, their cash flow, that type of information, because that information is in the public domain. But you cannot take a company that has got environmental reporting and compare it, necessarily, with parameters, with a company that has not got environmental reporting, because, by implication, where the company has not got the parameters, so you would never find out. But the tension that was implicit in this thing about have companies been proved over time, it goes back to my earlier point, and certainly my colleagues here could look at all their clients and list 10, 20, 30 parameters, waste discharges, air quality, whatever, where they have improved; if you took their overall environmental footprint over that ten years, or five-year period, where they have doubled their turnover perhaps, they have gone through growth by takeover, at the end of the day, that company will probably be a bigger polluter than it was five years before.

  141. Who should be responsible to verify the report, to say that, "This bit of the report is complete window-dressing, it means nothing at all, but this statistic is important," if it is produced by that; who verifies the report, or who should?
  (Mr Adams) In the absence of mandatory reporting, every verification engagement that is undertaken is what we would call a bespoke, or it is a one-off; the terms of reference for the engagement are agreed between the verifier and the management.

  142. Who is the verifier?
  (Mr Adams) The verifier might be Aspinwall, ERM, Ernst & Young, KPMG.

  143. The company that is employed by the ...
  (Mr Adams) Normally, an independent organisation employed specifically for providing an opinion on some aspect of the environmental report; and I have to couch it in those terms simply because, again, in financial statement auditing you have got a Companies Act that prescribes the form and content of the reports and prescribes what the financial auditor must report on, the three major, four major issues they must report on. There is nothing of that nature in existence in environmental reporting, and therefore every engagement is unique; therefore, the terms of reference, I will have to leave that to you how the terms of reference for an engagement are sorted out.
  (Dr Woollard) The verifiers are completely unregulated, anyone can do a verification of a company, if the company pays them, or sometimes when the company does not.

  144. How can the public or any other stakeholder get any degree of credibility in the report which is not verified?
  (Mr Rintoul) The organisation that is doing the verifying, their track record for doing verifying; that is number one. I think that should give a level of assurance. And also, I have to agree with Roger completely, there is no sort of standardised or mandatory way of doing it, but there are common themes; and in the verification statement, when you open the verification statement, ourselves and ERM as well, we would state which system elements were the boundary which has been verified and audited, and using which broad techniques. So it comes down really to the verifier, in some appropriate way, indicating in the report the level of detail and the breadth of the verification audit; however, having said that, there is considerable scope for abuse. I have seen verification statements from people, organisations, that say little more than, "This is a sound report," with no indication of the level of detail, whether they looked at data, systems, commitments, and so on and so forth, whether it sampled, 100 per cent audited, or whatever.


  145. Mr Rintoul, you have got some experience obviously of verifying Government Departments; what did you find there?
  (Mr Rintoul) In what sense, because it is a very open question?

  146. Where were the weaknesses?
  (Mr Rintoul) The weaknesses, without a shadow of a doubt, the immediate weaknesses, were the absence of data on which to make judgements, form opinions.

  147. Is this the maturity point you are making?
  (Mr Rintoul) It is the maturity point, but also the absence, in some instances, of any data.

  148. At all?
  (Mr Rintoul) At all; yes. I suspect the level of what I would call environmental sustainable literacy, and understanding of what sustainable management and development is, is maybe at the same level in most Government Departments, and most parts of Government Departments, as where financial management was ten or 15 years ago; it is a grave concern but something which can be rectified. So I would say that the absence of data, and certainly the absence of robust trend data, and then when you look a bit closer and you look at the systems you also see, basically, the reason why there is an absence of data is there is an absence of systems; this data is just not routinely looked at, for any reason, and it is just symptomatic of, it is not managed.

  149. That is the point I wanted to come to, because you have emphasised the point that what appears externally is merely a reflection of what is done internally, and it is the internal thing which really matters. The fact that the Government is so poor, by comparison with the private sector, on its external reporting surely implies that what is done internally, it is not environmental because it is really not integrated, or environmental audit is not integrated into the whole system of Government policy-making?
  (Mr Rintoul) From a general point of view, making a general point, I would have to agree. There are signs that that is changing, in all Departments, and more so in some Departments than others.

  150. But, as a general statement, that is true?
  (Mr Rintoul) As a general statement. That is also why, I will go back to a comment I made earlier that, even with DETR, which must be seen as one of the most important Departments in this whole debate, when we sat down with them and worked out about reporting, and so on and so forth, we actually said to them, "There's a five-year strategy here for you, you're not going to do it all in year one," because that five years is required to build the underlying systems, get the confidence, the experience, the data flows, the trends, take out some of these instances where you get an opportunistic gain one year, because you disposed of 200 buildings from your estate, and next year you have acquired a few more, so it changes. And it is going to take that sort of time frame. And there are a lot of developments going on. Now that is not to say that within the people that are now attempting and managing these types of impacts and activities there is not the understanding of what they are doing and why they are trying to do it, and they are equally hamstrung by the absence of the underlying systems as well. But, I have to say, it is almost a generic failure, or mismanagement.

  151. The other problem is cost, is it not, because it is significant resources that have got to be put into this?
  (Mr Rintoul) I would say, yes, there are obviously cost issues, but I would say, if these are streams of activity or resources on which funds are being paid out, public funds, whether it is energy, whether it is waste disposal, whatever, there is a cost associated with those anyway, and, if you do not manage it, how do you know whether the cost is being well spent or poorly spent.

  152. So what you are saying is that they are spending the money anyway, something like £500 million to subsidise a new jumbo-jet for Europe; if they would put 1 per cent of that into finding out whether there was a proper environmental appraisal it would make some sense?
  (Ms MacGillivray) Yes; and a lot of these things are part of best value which you are asking Departments to report on anyway.
  (Mr Rintoul) I cannot understand how you can have somebody, and I am not thinking of any one person or any one Department here, I must actually say that, I cannot understand how any person sitting there, part of whose job description is to be the departmental energy manager, or have some involvement in waste management, and not understand the cost of doing it. And the cost of his job is to manage that, it is not an additional cost to collect the information, he needs that information to do his job, surely.

Mr Chaytor

  153. Chairman, could I ask about this concept of environmental literacy, which I think is extremely interesting, and just ask specifically how do you think that can best be developed both within Government Departments and within the corporate sector as well; is there some example of good practice, of companies that have particularly committed themselves to programmes of environmental literacy?
  (Mr Rintoul) It has not been committed to a programme, if you like, an overt programme of environmental literacy. On Monday of this week, I was working with Reckitt Benckiser, Benckiser, which is a German company, has merged with the old Reckitt and Colman, it is now Reckitt Benckiser; and they have actually, as part of their staff development and training programme, so it is part of a wider programme, they actually train a large percentage of their staff in the principles of auditing, whether it is process auditing, environmental auditing, safety auditing, whatever, and they have a culture there where people audit each other. Now, as part of that training programme, which is built round the principle of auditing, there is a great building of environmental literacy, process literacy, financial management literacy, as well. I see companies like that, and I just think of that one because it is the one I have most recently been into, so they are building these competencies in their staff for business benefit, but it is not specifically saying environmental literacy, necessarily.

  154. No, I understand that; but is that a model that could easily be transferred to Government Departments or Government Agencies?
  (Mr Rintoul) I would hope so.

Mr Thomas

  155. I was just wondering about the question of international accountability and verification, and not so much the point that Joan Walley raised earlier about language but about the cultural filters that come on this, and I wonder if you have any views on, particularly in the private sector, with international conglomerates, how they report differently, if you like, through those cultural filters to different countries? And one example which came to mind would be perhaps a company in Canada, a pesticide company in Canada, say, which we saw a few weeks ago, being able to report perhaps some significant improvements on their environmental performance because of the use of GM crops; and that would not be an appropriate way to report in this country, I would suggest. So where do you pick the international standard there about the reality of what has been set, how much of this is objective, how much of this is subjective, and how much can international standards really pin this down to what the footprint part of it is and what that company has left behind, or has changed an environment, when it moves on from year to year?
  (Dr Woollard) Just one point about language, and it does not deal with your question in its entirety, I am afraid, but I am noticing a trend of companies like Rio Tinto and Tetra Pak who say, "We can't encapsulate this all in one global report that we send out, we have different reports for different countries." Rio Tinto, I think, has 15 local, either regional or country-specific reports, just because of the languages and the understanding of the issues, and what people are interested in varies so enormously.

  156. The understanding, is that environmental literacy?
  (Dr Woollard) Yes, and it is cultural differences in what they are interested in, what they want to report on, so Rio Tinto has 15 different reports, Tetra Pak has a whole load of different reports for different countries, and they feel that that is the most appropriate way to respond to the diverse audience they have got.

  157. Can I just ask if those different reports have the same standards?
  (Dr Woollard) No. Interestingly, they are often not terribly well controlled, but I think that is quite a good thing as well; if they were all the same then they would just be back to the one report. It is actually quite good, from an internal operation standpoint, that they feel, parts of their organisation feel, perfectly knowledgeable to prepare their own report, and, I think, in many ways, they ought to be praised for doing that, because a small part of the operation can actually put together its own report and put it out to that region. Now if someone wants to criticise that company they can do it quite easily by saying there is not consistency between the different reports and a core report, but I think that is slightly unfair.
  (Mr Adams) I think you can look at it from that perspective, but you can also look at something like the Shell experience in the last five years, where, whereas, in a sense, Body Shop was born with values, Shell had values thrust upon it, and you cannot read a page of the Shell report without understanding its values. Now it is perfectly fine for companies to report, to recognise the culturally different contexts within which they operate, which might have something, it might be reporting very heavily on gender issues at the management level in its European companies, but not so much in its operations in the Gulf, or something, or in Pakistan, I would be happy to see those cultural differences reflected in the reports, provided that there is a continuing acknowledgement of values throughout. If a multinational corporation does not have a single, global set of values and a strategy or vision approach then I think it is unlikely to maximise its earnings for shareholders, let alone do any of these other things properly. So, I think, again, it is one of these tensions where values versus cultural diversity has to be juggled.


  158. You have talked about the difference between the public sector and the private sector; thinking now of the public sector specifically, how do you see, in your view and your experience, environmental audit and environmental accountability developing within the public sector, from the position which Mr Rintoul in particular was just commenting on, how do you see that developing in the next few years?
  (Dr Woollard) The reporting and the development of management systems and the development of literacy I see as all part of the same sort of thing. It is quite easy now to look at reports and very easily tell what sort of company this is; from my perspective, I can look at these reports and I can really tell what sort of management system they have got, what sort of culture, how long it has been going, probably how much they have spent on their reporting, and how far down the road they are to developing the really strong systems, because they just show through increasingly in what they can report, because some companies can report so much. So I see them all as being very tightly connected. My small thought for Government is that I do not think you can push too hard in any one area; if you suddenly say, "We're going to produce state of the art reports," but you have not actually got the basic environmental literacy or understanding of what the issues are then you are running before you can walk. So, I think, the experience of the companies I work for is that the first report is a rather thin, rather glossy, rather anecdote-full, kind of brochure-like output, but over the years they gradually get better, they gradually start putting more data in because they can, and their systems start to get certified, and then people become more knowledgeable and they start leading in certain areas and their report gets better and better. I have spoken too long; but my short reply is that I think you need to work in all of those areas and recognise that getting a very simple, maybe not very full of data type report out there will just reflect honestly the stage you are at, of just understanding the issues.

  159. But, given what you said about judging the personality, if you like, of the company, from the report, you do not get any similar thing in the public sector, you are not able to judge the personality of the DTI or the DETR?
  (Ms MacGillivray) I think the drivers in the public sector are rather different, and we feel that sustainability is a driver and something the public sector is interested in, and talking about developing sustainability strategies. It does not really mean anything to private sector clients, who are doing this for different reasons that we have already talked about. And I feel really that developing a sustainability strategy and then the systems to implement that, and the reports to report against, it is part of the process and really the rationale for doing it, rather than reporting on green housekeeping and how well we manage our buildings, and so on. That will give the framework for reporting about wider impacts and indirect impacts of policies, and so on, and would make it rather more interesting and relevant to those that might pick up the report and show the character of Departments and what they are doing, rather than energy efficiency.
  (Mr Rintoul) I think, to come back to, again, the question of saying what do the reports tell us about the character of a Department, I think the sample is too small, that is number one, we have not got enough things to compare it against over a long enough time, and that speaks volumes in itself. I would also agree with everything that Anna and Tom said, that some of these conclusions we can draw from the private sector is because we have got five, ten years' experience of it, and there is just not that length of experience in the public sector yet.

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