Comment by Mitun Majumdar. From the April/May 2010 edition of Corporate Citizenship Briefing, Issue 111.
The BP oil disaster in the Gulf of Mexico is a stark reminder of the link between companies’ management of their environmental and social risks and business performance. And it is no wonder that shareholders and investors are demanding greater and clearer disclosure of non-financial information. The introduction of Enhanced Business Reviews as part of the Companies Act 2006 was designed to address this expectation, setting out that a company must include information on environmental and social matters as part of its annual business review. However, recent research conducted by Corporate Responsibility (CORE) Coalition finds significant variation in the standards of non-financial reporting amongst the FTSE 100, indicating that the Companies Act has not achieved what it, at least in part, set out to do.
At first glance, the results of the research are surprising. Companies, it suggests, are failing to properly integrate reporting of environmental and social factors into their business reviews. Yet, recent years have seen an increasing number of companies produce stand-alone corporate responsibility reports. The standard of reporting has also improved with many companies providing comprehensive assessments, including key performance indicators, of the environmental and social issues affecting the business.
The research shows the need for companies to improve how they link their corporate responsibility performance back to overall financial performance and better integration of existing corporate responsibility reporting into annual financial reporting. At the same time, Government has an important role to play. It needs to provide clearer guidance on the level and type of non-financial disclosure required in annual reports, to make environmental and social reporting more meaningful and comparable to shareholders and investors.
Mitun is a senior consultant at Corporate Citizenship Email her at mitun.majumdar@corporate-citizenship.com to discuss assurance, reporting, economic impact and strategy.
FTSE100 company reports reveal inadequacy of Companies Act
The Companies Act has failed to make environmental and social reporting simpler and more effective according to a new report released on April 28 by the Corporate Responsibility (CORE) Coalition. Although the Companies Act makes business reviews mandatory, initial analysis of FTSE100 company reviews shows that many companies not acting in the spirit of the reporting requirement. Findings include; 8% of companies in the FTSE100 have no clearly identifiable business review, leading to confusion for shareholders and stakeholders alike; 17% made no reference to environmental issues, despite wide acceptance that climate change is a business risk; 8% completely failed to include any social issues in their business review; 14% failed to include any social issues other than labour. Of the FTSE100 company accounts reviewed, AstraZeneca, Friends Provident, Hammerson, HSBC and Thomson Reuters were deemed to be the worst performers in terms of the level of non-financial information reported.
Government supports south west marine energy businesses
The UK Government has confirmed an investment of £5 million towards a £12.8 million project to help create a new marine energy business park in Hayle, Cornwall. The investment is from the Departments for Business, Innovation and Skills (BIS) and Energy and Climate Change (DECC), and is part of a £19.5 million fund that was earmarked for investment in marine energy projects in the region when South West England was designated the UK’s first Low Carbon Economic Area last year.
The sustainable procurement strategy sets out how the MoD will work with its industrial partners to develop and introduce new technologies, particularly those concerning renewable and sustainable energy. Under the plan, purchasers will be required to embrace sustainable development in all areas and stages of acquisition, including; integrating sustainable development principles throughout the MoD acquisition process and taking a “through-life” approach to procurement projects to deliver solutions that consider the social, economic and environmental aspects of sustainable development and maintain and improve operational sustainability. According to the MoD, green purchasing will help reduce fuel and through-life costs of equipment.
Czech power station overhaul gives rise to protests
The Prunérov power station is the Czech Republic’s biggest polluter, emitting 11.1 million tons of carbon dioxide each year. CEZ Group, the state-controlled utility, has proposed an overhaul to extend the facility’s life for another quarter of a century, giving rise to protests from Greenpeace, and a legal challenge from the Federated States of Micronesia, situated 8,000 miles away in the Pacific Ocean, on the grounds that its chronic pollution threatens the island nation’s existence. Micronesia is using an established principle in international law, called trans-boundary harm, although this is the first time the tenet has been applied to climate change. In an additional twist, the Czech Environment Minister, Jan Dusik, recently resigned from government rather than give way to pressure from the plants operator CEZ, and the Prime Minister, to approve an extension to the power plant’s operational life.
The new UK government must prioritise environmental reform with the same urgency as economic reform. This is the central message of a new report published on April 29 by the Aldersgate Group (AG), a high-level coalition of businesses, NGOs, think tanks, MPs and individuals, who believe that high environmental standards are essential for future economic growth and competitiveness. The report, ‘Accelerating the Transition: Priorities for the first 100 days of the new government’, outlined how, although the three leading parties have taken up the policies of a Green Investment Bank and measures to improve resource efficiency (both covered in previous Aldersgate reports), none of the manifestos have reflected the true depth and rapidity of change that the UK economy must undergo.
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