Select Committee on Environmental Audit Appendices to the Minutes of Evidence


Memorandum from the Department of the Environment, Transport and the Regions (DETR)


1.  Internationally, environmental reporting by businesses has grown rapidly over the last few years. In 1990 only a handful of companies reported. By 1998 an estimated 2,000 reported internationally.

  2.  In the UK the move towards environmental reporting also appears to be picking up pace. The picture is, however, complicated by the fact that the term "environmental reporting" is used to cover a range of activities, including in particular:

    —  voluntary company environmental reporting—the publication, in the Annual Report and/or self-standing reports, of general environmental policy statements, usually including details of environmental performance such as greenhouse gas emissions and quantified data and improvement targets. Reporting against emissions or other targets may also be carried out on site specific environmental performance and management systems prepared under the voluntary registration scheme (EU Eco Management and Audit Scheme—EMAS). The Government is also encouraging companies to report against specific emissions or other targets through its new Making a Corporate Commitment campaign (MACC 2);

    —  mandatory site specific reporting—companies whose processes are regulated under integrated Pollution Control are required by law to report emissions to air and water of certain pollutants above a specific threshold to the Environment Agency. This information is made public via the Pollution Inventory.

  3.  In addition, companies involved in Climate Change Levy agreements or Emissions Trading will, in future, also be reporting environmental performance information to the relevant authorities.

  4.  This note, however, uses the term environmental reporting to refer to voluntary reporting only.


  5.  In the UK, as elsewhere, larger companies are more likely to report than smaller companies. Among the FTSE top 100 companies about 45 currently publish an environmental report, either as separate documents or on websites, covering environmental policies and performance and, in many cases, quantified targets for improvement. Up to 20 more top 100 companies have indicated that they will produce their first environmental reports by the end of 2001. Some other FTSE 100 companies include a brief statement of their environmental policy in annual reports (on which basis the Pensions and Investment Research Consultants (PIRC) survey of 1999 suggested that over 70 per cent of the FTSE top 350 reported), or are engaging on environmental issues but have not yet moved to full environmental reporting.

  6.  Reporting is currently much less common among the next 250 FTSE listed companies. An estimated 40 MidCap companies (16 per cent) publish environmental reports. There is little research available for environmental reporting trends among companies below the FTSE 350 and small and medium enterprises. However, it is clear that reporting is rare among these companies—with the exception of businesses like Bovince Ltd and Shields Environmental that were shortlisted for ACCA's environmental reporting awards last year.


  7.  Reporting also differs according to business sectors. The pioneers of reporting tended to be privatised utilities and companies with heavy environmental footprints. The last few years have seen a spread of environmental reporting to sectors not traditionally seen as major polluters (eg finance and telecommunications). Other sectors (eg IT and media) have been slower to respond. In the last two years Cable and Wireless, Biffa, CGU, RMC Group, Carlton Rolls Royce, Boots, the Woolwich, Scottish and Newcastle, Manchester Airport, Allied Domecq, and Prudential are among companies that have started to report.


  8.  There are a number of current developments that are likely to encourage companies of all sizes to report on their environmental impacts. These are discussed below.


  9.  In the past companies have not always been clear about how to report. The 1999 Sustainable Development Strategy, A Better Quality of Life, promised that DETR would produce guidelines on how to measure and report on three key impacts—greenhouse gas emissions, waste and water use. Guidance on greenhouse gas emissions (June 1999) has been well received by business—over 50 large companies have used it to date. Similar guidance on waste was published in June 2000 and guidelines on water will follow before the end of 2000.


  10.  The Department has recognised that some businesses—particularly those lacking the management resources of larger companies—are not in a position to produce full environmental reports in the first instance, and may need to adopt an incremental approach towards reporting. To help non-reporters get started DETR relaunched the Making a Corporate Commitment (MACC 2) campaign in June this year. MACC 2 encourages organisations to make a voluntary board level commitment to sustainable business practice, and provides a framework that allows companies to take the first steps towards measuring and reporting on environmental impacts. Participants are asked to concentrate on one or more of three issues—greenhouse gas emissions, waste and water—with the option of including targets in other important areas (eg raw materials use and biodiversity). The first MACC exercise attracted 2000 participants in its first five years. MACC 2 is more demanding, since it asks companies to declare improvement targets, and we wait to see what the uptake by business will be.


  11.  Two major sets of guidelines have been published in the last few months. In July, the UNEP backed Global Reporting Initiative (GRI) published guidelines on company sustainability reporting, including a large section on environmental reporting. In October, the World Business Council for Sustainable Development (WBCSD) published guidelines on eco-efficiency reporting. Both the GRI and WBCSD guidance recommend a small common core of environmental indicators based around energy use and greenhouse gas emissions, waste, and water use.


  12.  From July 2000 new regulations under the Pensions Act 1995 have required occupational pension funds to report publicly the extent to which social, environmental or ethical considerations are taken into account when they invest money. This is likely to promote the growth of the market in socially responsible investment and fuel demand for information about companies' environmental, social and ethical policies and performance. A survey by the environmental consultancy ERM last June found that 21 out of 25 UK pensions companies were developing ethical investment policies. This renewed interest from the investment community is likely to increase the demand for good quality environmental information, and increased interest in the extent to which environmental performance is related to the financial performance. The Advisory Committee on Business and the Environment has recently set up a new group to look at relevant issues, including the information needs of the investment community.


  13.  The independent steering group running the Company Law Review issued a consultation draft in March. The draft proposes that company Directors should include in their annual reports information on environmental issues where these are material to the company. These include costs and liabilities, policies and performance, and policies and performance on community, social and ethical issues. We understand that several responses to consultation on the review—for example those from the Environment Agency, and the Association of Chartered Certified Accountants—have expressed the concern that proposed changes to the Company Law would do little to move the agenda forward. The Advisory Committee on Business and the Environment also highlighted the importance of the issue of materiality in their response—attached. DETR Ministers will want to consider this carefully with colleagues when the review presents its recommendations to Government in Spring 2001. The Secretary of State for Trade and Industry has also said that disclosure of environmental matters will be an important issue for Ministers to consider when the review reports.


  14.  The combined effect of the developments discussed above is likely to increase the level of reporting among major companies. In his speech to the CBI/Green Alliance conference on 24 October, the Prime Minister challenged the top 350 companies to report on their environmental performance by the end of 2001. DETR and DTI are considering what more can be done to support companies who have little or no experience of environmental reporting, including publishing further guidance on business environmental reporting. This guidance would cover the basics of environmental management and reporting, and would support the use of the detailed guidelines already in place. We would aim to keep the overarching guidance broadly in line with the core elements of the GRI and WBCSD guidance to help develop the growing international consensus on what reporting should entail. We also aim to ensure that it relates to key indicators set out in the Government's sustainable development strategy.

October 2000

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