15th July 2004 - New report - 'Environmental disclosure in the FTSE All Share'

Less than a quarter of FTSE All Share companies make any quantitative environmental disclosures in their Annual Reports and Accounts, despite new DTI regulation calling for this from January 2005.

London, Thursday 15th July 2004: The Environment Agency today revealed the results of the first study of environmental disclosure within the Annual Reports and Accounts of FTSE All Share companies. The basic findings of the report indicate that the vast majority (89%) of companies discuss some aspect of their interactions with the environment.  However, closer examination of these disclosures revealed that the majority lack depth, rigour and quantification and few could be described as comprehensive, or adequate for shareholders to properly assess environmental risks or opportunities. 

Only 10% of the FTSE All Share (55 companies) use Annual Reports and Accounts to report on waste, water and energy/climate change, and even less provide quantitative information. This is particularly surprising given the Defra environmental reporting guidelines that recommend that all companies report on these issues as a minimum.

Quantitative environmental disclosures (excluding provisions and contingent liabilities) are made by 24% of companies in the FTSE All Share. Where made, they are seldom related to possible financial consequences (11% of FTSE 350) or linked to future changes in shareholder value (5% of FTSE 350).

The Environment Agency commissioned Trucost to study the current extent and nature of environmental disclosure of FTSE All Share companies in order to establish a baseline prior to the introduction of mandatory OFR reporting requirements in 2005.  This study, which used a comprehensive, standard methodology, provides a valuable benchmark of corporate environmental disclosure for industry that will allow assessment of future progress towards greater corporate transparency in this area.  The Environment Agency intends to repeat this study in 2006.

Good practice is highlighted in the study, as demonstrated by Scottish Power - for its extensive disclosures covering 18 environmental topics; Slough Estates – for providing the most number of quantified disclosures; and BP – for making the highest number disclosures in the audited sections of their report.

Barbara Young, Chief Executive of the Environment Agency, said: “Though we commend companies for reporting to an extent on their environmental performance, data supplied to the Environment Agency, Defra and the EU is not being sufficiently utilised for the benefit of informing shareholders about the environmental risks and opportunities that companies face.  The OFR is an opportunity for companies to demonstrate to stakeholders their commitment to becoming more economically and environmentally sustainable.”

Simon Thomas, Chairman, Trucost Plc, commented, “There is overall very little consistency in the type or quality of information disclosed, and guidelines with relevant key performance indicators are needed if the OFR objective of producing consistent, comparable and relevant environmental disclosure is to be achieved.  Given that data for the new OFRs will have to be collected from 1st January 2005, these guidelines and performance indicators need to be established as quickly as possible so that companies can begin collecting the data they will need.”

Howard Pearce, Head of Environmental Finance, Environment Agency, commented: “The Environment Agency believes that companies’ interactions with the environment are of significant financial importance and environmental disclosures need to be clear, consistent, comparable and compulsory (as for financial information).  Without this, customers, shareholders and potential investors cannot truly assess their environmental and financial results.  We commissioned this study to establish current environmental disclosure levels and we intend to repeat the study in 2006.”

The findings of the study are being discussed at a seminar at Merchant Taylors’ Hall in the City of London today by Barbara Young, Chief Executive of the Environment Agency, Simon Thomas, Chairman of Trucost, and others, including representatives of FTSE All Share companies Boots Group Plc, Land Securities and National Grid Transco Plc. Peter Scales (Chairman, IIGCC) and Simon Wilkinson (Head of Regulatory News Service, London Stock Exchange) will also contribute.

CONTACT (MEDIA ENQUIRIES):

Trucost: Philippa Thomson -
T: 020 7321 3731
info@trucost.com

Environment Agency: 020 7863 8710 (five lines) or outside normal office hours, please contact the National Duty Press Officer on pager no 07693 284 337

DOWNLOAD:
You can download the Summary Report and the Full Report via the link below. The Full Report is the extended version of the Summary Report and is split in two parts: Part One contains the results of the FTSE All Share study and an extended methodology. Part Two contains the sector-by-sector analysis of environmental disclosure. Designed as a reference document this contains disclosure profiles for 34 of the 36 FTSE sectors.

Click here to download the Summary Report and Full Report:http://www.trucost.com/FTSEdisclosure.html

KEY FINDINGS:

- 89% (507 companies out of 570) of FTSE All Share companies discuss their interaction with the environment in their Annual Reports and Accounts. But, the majority lack depth, rigour or quantification and 11% (63 companies) disclose nothing at all.

- 72% (415 companies) make a reference to environmental policies. But, less than 50% report on a subject other than their environmental policy, which in itself is not a measure of environmental performance.

- 58% (328 companies) report on one topic out of water, waste, energy use and climate change. But, only 10% report on all three.

- Only 24% (136 companies) of the FTSE All Share makes any quantitative environmental disclosures. Companies with environmental management systems do so more frequently.

- Only 17% (96 companies) of the FTSE All Share refer to climate change risks.

- Only 12% (69 companies) make environmental disclosures in the audited sections of their Annual Reports and Accounts under existing tests of materiality. 88% do not regard the environment as a material business risk.

- Only 11% (35 companies) of FTSE 350 companies link environmental issues to financial performance.

- Only 5% (18 companies) of FTSE 350 link environmental issues to shareholder value.

- FTSE All Share companies need to pay more attention to environmental issues in their Annual Reports and Accounts.

- Guidance on relevant key performance indicators would help companies decide which environmental disclosures are necessary to meet the requirements of the forthcoming Operating and Financial Review.

About Trucost Plc

Trucost plc is an environmental research company that was founded in 2000 to help companies understand the environmental impacts of their business activities and to develop a platform that would facilitate more disclosure. Trucost provides data and analysis on company emissions and natural resource usage and presents these in financial as well as quantity terms. The external cost methodology employed by Trucost ranks a company's environmental impacts in order of significance, enabling directors and auditors to focus their efforts on those impacts that are likely to be material to their business. This also forms a transparent process with which a company and its auditors can assess whether it should make a public disclosure under the proposed Operating and Financial Review regulations. By presenting environmental performance in financial terms, Trucost research provides the basis for improved dialogue between the companies and investors or other stakeholders.

Trucost provides research to fund managers, analysts and other commentators on over 1,700 companies worldwide, including the entire FTSE All Share. Trucost has the support of an International Advisory panel of eleven leading academics in the fields of economics and the environment who lend their considerable experience to the specialist research staff located in London.

About The Environment Agency

The Environment Agency for England and Wales is a Non-Departmental Public Body (NDPB), set up under the Environment Act 1995, to take an integrated approach to environmental protection and enhancement in England and Wales.  The Agency has major responsibilities for controlling industrial pollution and wastes management, regulation of the water environment, and for protection against flooding from rivers and the sea. The Environment Agency's primary aim is to protect and improve the environment and make a contribution towards the delivery of sustainable development through the integrated management of air, land and water.