FTSE 100 Environmental Reports: Could Do Better…
Award-bagging length, critical terminology lapses and sector disconnects are hallmarks of Financial Reporting’s Younger Cousin
Longer corporate responsibility (CR) reports do increase the likelihood of winning ‘sustainability’ awards; corporations fail to define critical reference terms; and heavy polluters are not necessarily heavy communicators - these are key findings from a new linguistic and statistical analysis of the way FTSE 100 companies are choosing to report their environmental and corporate responsibility progress.
Launched today by Spada, the leading professional and corporate consultancy, Environmental Reporting: Trends in FTSE 100 Sustainability Reports investigates the terminology, thematic content and length of Britain’s leading corporate reports on sustainability.
The research analysed all of the most recent, publicly available reports from FTSE 100 companies using the latest linguistic and statistical software programs. Spada undertook the new research to help establish best practice in an activity (CR reporting) that offers a critical gauge on corporate progress towards protecting the environment.
Key highlights include:
Longer reports are positively correlated with winning an environmental or CR award: Statistical analysis shows that for every extra page in a CR report the likelihood of a company winning an international environmental award goes up by 3% (although the research does not suggest the link is causal).
‘Public facing’ companies report more regardless of their environmental impact: The amount of resources (in terms of writing and page length) devoted by companies to their CR reporting does not automatically correspond to the force of their impact on the environment. Consumer and stakeholder exposure would appear to be the driving factor behind this; for example, the Health Care sector (including pharmaceuticals) produces longer reports on average than does Oil and Gas; whereas lower carbon intensity sectors such as Telecommunications and Financials issue reports as long as those of Basic Materials (a sector which includes high-impact mining companies) and longer than those of Industrials.
Lack of clarity with terminology: Worryingly, the vast majority of companies fail to define what they mean when using various environmental terms and concepts – of the 79 organisations that use the term ‘sustainability’, only two (BP and British American Tobacco) define it in the first instance. This may mean that companies are opting for operational flexibility and/or greenwash as opposed to reporting performance against rigorously established and enforced standards.
Supply chain management is under-reported: Analysis of reporting language shows that the issues of resourcing and supply chain are among those least addressed, despite the crucial role it plays in delivering against the global sustainability agenda
Gavin Ingham Brooke, Managing Director of Spada, comments:
“In the sample we analysed there are many excellent examples of good, evidence based reports but a number of key issues need to be addressed within CR reporting as a whole.
“For example, should a company engaged in what might be regarded as an inherently harmful activity be rewarded for comprehensive environmental reporting? By the same token, are some companies who undertake wholly beneficial work failing to get the public recognition that their efforts deserve?
“Environmental reporting is still in its infancy compared to financial reporting, but with more media and public scrutiny on corporates’ green policies and credentials, it is essential that companies communicate – and are appraised on – these matters consistently and clearly.
“For FTSE 100 companies, and other leading businesses, the stakes could not be higher. Now is the time to develop a more rigorous consensus on how these issues should be communicated and appraised in the public domain. What is clear is that the CR report needs to mature as a format.”
The full white paper is available for download here.