APPENDIX 5
Memorandum from the Department of the
Environment, Transport and the Regions (DETR)
ENVIRONMENTAL REPORTING BY UK BUSINESSES
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.
WHICH COMPANIES
CURRENTLY PRODUCE
VOLUNTARY ENVIRONMENTAL
REPORTS
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.
REPORTING BY
BUSINESS SECTORS
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.
CURRENT DEVELOPMENTS
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.
PUBLICATION OF
REPORTING GUIDELINES
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.
MAKING A
CORPORATE COMMITMENT
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.
INTERNATIONAL DEVELOPMENTS
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.
THE PENSIONS
ACT
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.
THE COMPANY
LAW REVIEW
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.
FUTURE PLANS
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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