A vast majority of the carbon and environmental claims made by FTSE350 companies lack credibility and verification, according to a new report from Smart Sustainability, a leading sustainability consultancy.
Despite the grim conclusion, BSkyB, HSBC and Amlin were described as “Out in Front” for reporting carbon emissions along with BG Group, Kingfisher, and Reed Elsevier for their sustainability assuarances.
The report, ‘Just off the Starting Blocks – Benchmarking Sustainability and Carbon Assurance in the FTSE350’, examines the assurance statements published with the sustainability reports of all companies in the FTSE350. It reveals that only 75 companies – fewer than 25% - publish some form of assurance to verify or back-up the sustainability data they publish.
Of these, only 62 are carried out independently and are based on any recognised assurance standard.
The results for carbon emissions data alone are even worse. Only 38 companies in the FTSE350 clearly state that carbon emissions data have been verified. Of these, only two explicitly follow a standard for verifying carbon and only seven refer to a carbon reporting criteria.
As increased legislation such as the CRC-Energy Efficiency Scheme and the likelihood of mandatory greenhouse gas reporting begins to affect greater numbers of firms, there is likely to be greater demand from investors and other stakeholders for independently verified data to judge companies’ performance.
Ben Murray, Managing Director of Carbon Smart said: “These results are extremely worrying. Verified data is the only credible way to assess whether we are actually lowering our emissions and meeting our targets as a country. Currently we don’t have the data to make that assessment. It is staggering that companies think they can carry on like this. Investors would not accept a financial report which had not been audited, why would anyone think they’d accept carbon data at face value?”
“This report is a call to ensure more consistency in reporting and assurance standards. We hope it also provides guidance for firms looking to improve their sustainability reporting.”
The report rates all sustainability and carbon assurance statements in the FTSE350 against a set of best practice criteria. It divides the companies into four groups:
• Out in front: Leading companies with a clear assurance statement describing a comprehensive engagement.
• At the front of the pack: Good performers where the assurance statement was clear but described a more limited engagement.
• In the pack: Average companies where the assurance statement lacks clarity.
• At the back of the pack: Companies at the bottom of the league table who failed to clearly disclose the subject matter under assurance, the independence of the provider or details on the work conducted.
For sustainability assurance, companies way out in front include BG Group, Kingfisher, and Reed Elsevier, while those at the back of the pack include WH Smith, Investec and Man Group.
As for assurance of carbon emissions alone, Amlin, BSkyB and HSBC showed best practice and were rated as ‘Out in Front’, while Premier Oil, Man Group and Johnson Matthey fell to the back of the pack.
In 23 cases – with companies including BAE Systems, AstraZeneca, and Rolls-Royce Group - it was difficult to tell whether carbon was included in the scope of assurance statements or not.
The report also found that carbon emissions assurance was noticeably low in certain sectors. For example, none of the technology companies such as Logica and Invensys, provide verified carbon data, even though emissions from data centres now rival that from aviation and other sectors.
“It is clear that we need a carbon assurance standard that brings consistency to disclosure and reporting similar to that imposed by the EU ETS,” Ben Murray added. “With increased awareness and engagement from the investment community, carbon reporting can mature to a level where investors can come to depend on it.”
Nigel Topping, Chief Development Officer at the Carbon Disclosure Project (CDP), added: “CDP welcomes this research. Confidence in emissions and other climate change data is increasingly important as the issues around climate change become more and more relevant to businesses and investors.
“In 2010, CDP has invited 4700 of the world’s largest quoted companies to disclose climate change data to 534 institutional investors who between them manage assets of over $64 trillion. In 2009 82% of the global 500 companies disclosed to CDP. The number providing some form of assurance statement was considerably lower at 49%, although up significantly from 43% in 2008.
“In 2010 CDP is working with investors, corporations and regulators towards improving the reliability, transparency and relevance of greenhouse gas emissions disclosure which, in turn, will support the work of assurance and verification professionals.
“The Climate Disclosure Standards Board (CDSB) is developing a Reporting Framework for climate change related information. Through adoption of relevant principles from the international financial reporting model and reliance on the work of its Board members, CDSB’s Reporting Framework seeks to ensure that climate change related disclosures are prepared by reference to criteria that make them suitable for verification/assurance.”
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