 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
Trucost and the Environment Agency report on the environmental disclosures of FTSE All-Share under the requirements of the European Union Accounts Modernisation Directive
November 20th, 2006Four out of five of the first 100 companies in the FTSE All Share to file annual reports fail to disclose environmental performance indicators according to Government guidelines
The Environment Agency today reveals its latest study of the environmental disclosures of the first 100 companies in the FTSE All-Share to report under the Business Review requirement of the European Union Accounts Modernisation Directive. The report, ‘Environmental disclosure in the FTSE All Share: First 100 FTSE All Share Companies to report under the new Company Law reporting requirements’ reveals the following findings.
Eighty four percent of FTSE All-Share companies currently reporting have not yet disclosed in their annual report and accounts their environmental performance, in accordance with the Department for the Environment, Food and Rural Affairs guidelines. This is despite the fact that according to the new company reporting laws all FTSE All-Share companies producing annual report and accounts must disclose environmental key performance indicators where relevant.
The research carried out by Trucost is a follow up report to the environmental disclosures of FTSE All-Share companies study published by the Environment Agency in 2004 and reveals that although there has been a small increase, with 96 percent of the companies referring to some aspect of the environment in 2006, compared to 89 percent in 2004, the reporting is of low quality and little use to investors.
The study reviewed the annual report and accounts of the first 100 companies to report the financial year ending March 31, 2006, onwards, when the directive came into affect.
“Much of the reporting is still at a basic level, with 16% of companies making disclosures in accordance with government guidance and providing a quantitative figure. Although this figure represents an increase in the level of quantified disclosures there are still too few quantified disclosures to make meaningful comparisons between the environmental performance of companies,” said Environment Agency Chief Executive Barbara Young.
“These figures indicate confusion surrounding legislation in this area which now requires environmental impacts to be reported using quantitative measures where necessary, as found in Defra’s reporting guidelines.
“Defra has published guidelines on how companies should report environmental impacts, including greenhouse emissions, in order to promote a standard calculation method and to ensure consistent reporting. This guidance underwent extensive consultation with companies, investors, trade associations and other government departments and agencies prior to its launch in January 2006.”
Thirty-three percent of companies have made environmental disclosures in the audited sections of their annual report and accounts and 41 percent made disclosures in either their Operating and Financial Review, Business Review or Director’s Report that are subject to auditor review for consistency with the audited sections. This is a big increase compared with 2004, when just 12 per cent of companies made environmental disclosures in audited sections. Twenty-five did not a produce separate section clearly labelled Operating and Financial Review or Business Review.
FTSE ALL Share report (2)
Waste is the most widely reported environmental issue with 67 percent of companies mentioning it. Climate change and energy use were mentioned by 61 percent of companies and water by 38 percent of companies. Fifteen companies disclosed CO 2 emissions in absolute levels and 37 give some figures for energy. Five companies report on all environmental issues in quantitative terms, these were Emap PLC, Johnson Matthey PLC, Invensys PLC, Scottish Power PLC and Scottish and Southern Energy PLC. Only six companies linked environmental issues to financial performance or shareholder value.
“The growth in number of companies reporting on their environmental performance is encouraging however the results of this report show that there is still a lack of quantifiable data with which stakeholders can work,” continued Barbara Young.
“As the cost of environmental impacts becomes more apparent, it is important that companies respond and produce disclosures which are useful to stakeholders in their assessment of how this cost is being managed. New business review regulations provide an opportunity for companies to report how they are responding to increasing environmental costs.”
There has been an increase in the level of quantified disclosures. However, there are still too few quantified disclosures to make meaningful comparisons between the environmental performance of companies. Eighty-three per cent of the companies reported on just one topic out of water, waste, and energy use / climate change. Twenty-six per cent reported on all three topics.
“There has been some increase in the quantity of companies reporting on the environment. However the quality and usefulness of the data provided is still questionable,” added Chief Executive of Trucost Plc Simon Thomas.
“It is hard to see how investors and other stakeholders can use these disclosures to make informed decisions about how companies are managing their environmental impacts and risk. It is important to stress that the Company Law Act now requires companies to report on these matters and there are government guidelines which make it easy for companies to identify important and relevant impacts to their business and report it.”
Howard Pearce, Head of the Environmental Finance and Pension Fund Management at the Environment Agency and Chief Executive of Trucost Simon Thomas will discuss the findings of the study today, at the Environment Agency's Environmental Futures 2006 Conference at the Queen Elizabeth II Conference Centre, London.
“The Environment Agency believes that companies’ interactions with the environment are of significant financial importance and, although there has been a small increase in environmental disclosures, there is a lack of clear, consistent and comparable quantified data,” concluded Environment Agency Head of Environmental Finance Howard Pearce.
“Without this customers, shareholders and potential investors cannot truly assess a company’s environmental and financial results.”
Ends
Media enquiries: 020 7863 8710 (five lines), or outside normal office hours, please contact the National Duty Press Officer on 07798 882 092