Regulation and reporting: time to stop the free riders
June 01, 1996
As companies reveal more information about their management of environmental risks, the sterile debate over more or less regulation is moving on to set minimum standards and prevent free loaders.
BUSINESS ADVISES GOVERNMENT
The government’s Advisory Committee on Business and the Environment wants investors and financial institutions to develop a greater understanding of environmental risk and business performance. Presenting its sixth progress report on April 25, it said that rigourous monitoring, regulation and prosecution in the USA by the Securities and Exchange Commission and the Environmental Protection Agency has proved effective in generating change, and calls for a more stringent approach by the Environment Agency in the UK. The Committee is consulting on guidelines for good practice in reporting in annual accounts.
The Committee comprises some 20 company representatives, now chaired by David Davies of Johnson Matthey, succeeding Derek Wanless of NatWest Group. Other topics addressed in the sixth progress report were urban air quality, the internalisation of costs and waste management and minimisation. Contact Roz Masters, DTI, on 0171 215 1984 or for draft guidelines Anuar Miah, DOE, 0171 276 3788
GREEN REPORTS GROWING
The fourth KPMG annual survey of environmental reporting shows that 77 companies in the UK Top 100 now address environmental issues in their annual reports, up from 66 the previous year. However the extent and quality of information varies considerably: only four made reference to recognised environmental reporting standards and only 13 had any verification, either external or internal.
Published on May 28, the report details practice in 14 industry sectors, noting that the chemical and oil and gas sectors are the best established, with recent improvement in pharmaceuticals, printing, paper and packaging, transport, utilities and building. Examples of good practice include:
stating policy and management practices, with quantifiable targets;
reporting detailed performance, good and bad, describing the audit process;
disclosing environmental costs and liabilities, with external verification.
Contact Yvonne Levy, KPMG, on 0171 311 8837
CORPORATE ENVIRONMENTAL REPORTING
The Edinburgh-based accounts monitor, Company Reporting, has found a similar number of Top 100 companies with no disclosure of environmental information in their annual reports (18), while 32 publish a separate environmental report. But in a wider group of 684 companies the number making disclosures is stuck at 29%, unchanged from 1993, although the numbers disclosing “substantive” information is rising. Quality could be improved by providing data on performance against target and disclosing spend on environmental protection. Contact David Tonkin, Company Reporting, on 0131 558 1400
GREEN MANAGEMENT INDEX
Britain’s top 100 companies are being asked to provide information on how they manage environmental issues for an index compiled by Business in the Environment. Announced by Sir Anthony Cleaver on May 30, questions will cover how responsibility is assigned on the main board, written policy statements and audit processes. The index has been tested on the 12 member companies of BiE and will provide a benchmark on how well prepared a company is; it will not assess actual environmental performance. Contact Judith Cowan, BiE, on 0171 244 1600
MAJORITY FAVOURS REGULATION
Three quarters of leading companies do not believe that environmental legislation and regulations are too onerous (74%) and a clear majority (56%) say they are not rigorous enough. These findings come from a survey of 300 senior executives from Top 1000 UK companies, published on May 22. Seven in ten attach more importance to environmental issues than they did a year ago, but the main factors limiting further action are the perceived costs and lack of information about possible benefits. The research was sponsored by consultancy, Entec, in association with the Green Alliance. Contact Catherine Jones, Moffatt Associates Partnership, on 0171 723 7033
VOLUNTEERING FOR ENFORCEMENT
The government has accepted that legislation is necessary to impose a shared legal obligation on the packaging and distribution industries, if recycling targets under EU Directives are to be met; 50%-65% of the 8 million tonnes of annual packaging waste must be recovered by the year 2000 including 25%-45% recycled, so avoiding landfill. The government wanted a voluntary scheme in which producers accepted responsibility, avoiding a packaging tax or mandatory consumer take-back, but industry made it clear that ‘free riders’ had to be deterred.
Environment secretary, John Gummer MP, announced on May 7 that statutory regulations will empower the Environment Agency to monitor industry-led collective schemes such as VALPAK, imposing penalties on companies if necessary, with a de minimis exemption for companies producing less than 50 tonnes per year. Half the costs will fall on retailers, the rest on manufacturers and fillers. Sir Peter Parker is to head an advisory committee of producers to oversee the new arrangements. Contact DOE Enquiries on 0171 276 0900
SEARCHING FOR CONSENSUS
The first annual report of the UK Round Table on Sustainable Development was published on April 19, giving progress on transport, energy and environmental management and audit. The 35 member committee was established in January 1995 to seek consensus on major sustainable development issues, with representatives from academia, trade unions, individuals and the three sectors, public, voluntary and private including PowerGen, BP, Northern Foods and BP. Among recommended measures are: government to boost accreditation schemes like EMAS and BS7750; companies to use procurement policies to improve environmental performance down the supply chain; and the education world to promote greater understanding of green issues. Contact Round Table on 0171 276 5966
TARMAC’S FIRST REPORT
Construction group, Tarmac, published the first report of its independent Environment Advisory Panel on May 20. Company chairman, Sir John Banham, caught news headlines by saying Tarmac had learnt from road building at Twyford Down and would not accept a contract for the Newbury by-pass without re-examining environmental standards. The six-member panel aims to bridge the divide between industry and environmentalists. However their report is descriptive of Tarmacs activities rather than based on performance against targets. Contact Sean Bruen, Tarmac, on 01902 307407
CONSERVATION CABLES
NYNEX CableComms, Britain’s second largest cable company, has agreed a £300,000 sponsorship with the British Trust for Conservation Volunteers, announced on May 9. Over three years, projects will be organised in all 16 of NYNEX’s franchise areas. The initiative responds to concern at the disruption caused by cable-laying activities. Contact Allen Saunders, NYNEX, on 0180 873 5241
@4N HEAD = COMPANIES FUND WARMER HOMES
NEA, the campaign for warmer homes, has linked up with three companies to promote energy efficiency. On April 22, Midlands Electricity promised £500,000 over two years, following previous sponsorships which helped equip over 1,000 homes, train 900 people and assist 19 projects. Esso UK, celebrating 10 years partnership with NEA, reported on April 30 the results of its Conservenergy in Community scheme, which improved 21 village halls along with training schemes. On April 26, Halifax Building Society announced funding for a report on energy saving improvements for tenants. Contact Fiona Thomson, NEA, on 0191 261 5677
COMMITTED TO EXCELLENCE
Six companies won Premier Awards and another ten were commended, in the Business Commitment to the Environment Annual Awards, presented on May 23. Now in their 21st year, the aim is to celebrate excellence in environmental performance and the awards are supported by the Railway Community Network, British Steel and National Power. Winners included London Underground for the Jubilee Line extension, Thames Water and B&Q, part of Kingfisher. Contact Christine Leese, Groundwork, on 01706 842212
SAVE WASTE, SAVE MONEY
The government has published three new guides on the theme ‘saving money through waste minimisation’, addressing use of raw materials, reduced water use and staff involvement through teams and champions. Contact Environmental Technology Best Practice Programme Helpline on 0800 585794
COMMENT
The chairman of Du Pont has been quoted as saying “environmentalists can agitate; governments can regulate; but industry can innovate”. He is right, if he means that the buck stops with business to act. But he is wrong, if he means that the other two don’t matter or that industry will move far enough fast enough without pressure. As Mr Gummer has found, having spent two years trying to avoid legislation, things are not quite so simple.
It is time to end the slow and sterile ritual. First community activists protest at environmental damage by companies and demand regulation. Companies resist and government prevaricates, more or less enthusiastic depending on its political persuasion and interventionist stance. But then business starts to act, fearful of regulation and keen to show it is responsible. The ritual ends with companies themselves asking for legislation to set minimum standards and prevent free loaders shirking their share of the costs.
In cases of market failure, the only way to ensure common costs are internalised is through regulation. Surely it is time to speed the process and use bodies such as the Round Table to reach a measure of consensus on when to regulate and how far. In the meantime publishing environmental reports and producing indices of the quality of environmental systems are all grist to the mill of risk management: those that know how, succeed; those that do not, risk failure.
COMMENTS