Key Findings

Some things have improved since 2004:

• There is evidence that there is more environmental reporting. However much environmental reporting is still at a very basic level – it may be just a one-word mention of a key phrase that this study was designed to identify. (Ninety six per cent of the companies referred to the environment in 2006, compared to 89 per cent in 2004.)
• There has been an increase in the level of quantified disclosures. Nearly half of the companies surveyed provided statistics and figures. However only 21 per cent provided quantified disclosures to enable 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. (In 2004 the figures were 58 per cent and 10 per cent respectively.)
• Thirty three per cent of companies have made environmental disclosures in the audited sections of their annual report and accounts and 41 per cent made disclosures in either their OFR, 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 OFR or Business Review.

Some things have not changed since the 2004 report: 

• Very few disclosures are comprehensive or enable shareholders to assess the environmental risks or opportunities facing a company.
• Only 16 companies made a disclosure in accordance with Government guidance, that is a disclosure which is an absolute quantitative figure that applies to the whole company. Only this level of disclosure allows an accurate assessment of a company’s environmental impacts and enable comparison.
• Waste management: 67 companies report on this but only 20 disclose quantitative information of any kind.
• Climate change or energy use: 61 companies report on this but only 37 disclose quantitative information of any kind.
• Water use: 38 companies discuss this but only nine do so quantitatively.
• Five companies give absolute figures for waste, CO2 emissions and water use. They were
• Emap PLC         
• Johnson Matthey PLC         
• Invensys PLC         
• Scottish Power PLC         
• Scottish and Southern Energy PLC 

Why did the Environment Agency commission the research?

In 2004 we commissioned Trucost to conduct the first ever study of the environmental disclosures made by 570 FTSE All-Share companies. It was intended as a baseline study before the new requirement for an Operating Financial Review (OFR) came into effect. The 2004 report showed that although 89 per cent of the companies made some reference to the environment, there was little or no meaningful quantified information for shareholders and investors to make decisions.  

Since our 2004 study the reporting framework has moved on. The Government abolished the OFR requirement. However, the EU Accounts Modernisation Directive is now in force and requires public companies to report on relevant environmental issues using key performance indicators in the Business Review. Furthermore, the Companies Bill, currently making its way through Parliament, will require that directors’ general duties include the impact of the company’s operations on the community and the environment.

In January 2006 Defra published Government guidelines for company reporting using environmental key performance indicators. This 2006 report examines the first 100 annual reports and accounts produced by FTSE All-Share companies under this new reporting regime.

Report image: Waste management

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