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                                                                        An analysis of the environmental and corporate
Directions in Environmental and                                         social responsibility (CSR) reporting practices of
CSR Reporting 2000/01                                                   the UK’s top 200 companies.

                                20                                      With commentary and analysis from:
                              60˚




                                                                        • Roger Cowe – Journalist
                                                                        • Mark Wade – Shell
                                                                        • Simon Propper and Peter Knight –
Researched and published by                                               Environmental Context
                                                                        • Nigel Salter – salterbaxter
                              50˚
                              40˚
Environmental and corporate social responsibility (CSR) reporting has
                                                                       evolved substantially over the last decade.

                                                                       There is no doubt that the concepts of environmental performance,
                                                                       corporate responsibility and sustainability are now, at the very least,
                                                                       being discussed at board level in major corporations.

                                                                       Government pressure, demands from the investment community, growth
                                                                       in private share ownership, high profile environmental stories and the
                                                                       increasingly demonstrable business benefits have all contributed to the
                                                                       issues moving up the agenda for discussion.

                                                                       But a lot of it is just that - discussion. The underlying direction that
                                                                       reporting is taking is still unclear. Outside the heavily regulated
                                                                       industries that have dealt with these issues for years companies are
                                                                       unsure how to engage with the debate.

                                                                       It seemed to us that it was time to establish the real state of
                                                                       environment and CSR reporting in the UK’s top companies.

                                                                       We are not being judgmental but merely recording what companies are
                                                                       doing. Indeed, one of the clearest messages to emerge from our research
                                                                       is that those who are just beginning to address CSR are discouraged by
                                                                       the judgmental approaches and ‘scoring’ techniques of the
Contents                                                               benchmarking organisations.
1   Introduction                           12 Methodology              This survey records and analyses where companies have got to in the
2   Roger Cowe:                            13 Analysis – overview
    Investors need information.
                                                                       field of reporting. We discuss through the articles and commentary
                                           14 Analysis
4   How the UK government encourages       16 Analysis by sector
                                                                       some of the practical views and the issues involved with reporting in
    reporting.
                                           19 Looking forward
                                                                       the real world of business.
6   Mark Wade:
    Why Shell reports.                     20 International overview
8   Simon Propper and Peter Knight:        22 Data UK top 200          This is the first edition of this research document. We plan to publish
    Reasons to take the plunge.                                        every year, expanding our scope and identifying emerging trends.
10 Nigel Salter:
   Reporting is one thing, communicating
   effectively is quite another.                                       Your feedback would be most welcome.




                                                                       Nigel Salter                        Simon Propper
                                                                       salterbaxter                        Environmental Context

                                                                       nsalter@salterbaxter.com            simonp@econtext.co.uk




                                                                       Directions 1
INVESTORS NEED INFORMATION by Roger Cowe
More than £3bn is now invested in ethical funds – unit
trusts and similar vehicles for collective investment,
which exclude certain unacceptable industries or                                                                                                                                             ‘This year sees the launch of a series of
                                                                                                                                                                                               SRI indices from FTSE International…
activities or focus on benign areas of the economy.                                                                                                                                         they come under the banner FTSE4Good,
                                                                                                                                                                                                 and the UK version will include only
                                                                                                                                                                                               those members of the FTSE All-Share
                                                                                                                                                                                                         index which meet social and
                                                                                                                                                                                                           environmental standards.’




 1
                                     Ethical investment is the best-known face of the         The same applies to social responsibility. Socially       The audience is growing rapidly, and is already a         Few pension funds will go as far as USS, which is
                                     “concerned shareholder”. But it is just the tip of the   responsible investors are no different in needing         long way from the niche market of retail ethical          incorporating these issues into its routine investment
                                     iceberg of socially responsible investment (SRI) and     information on which to base their investment             investors. Henderson and CGNU’s fund management           management. But many will ask their fund managers
                                     can give a misleading impression of what such            decisions. They need to know what companies’              arm, Morley Fund Management, each speak for               to “engage” to some extent. Companies have to face
                                     shareholders want from their investments.                policies are, how they are performing in areas such       about £70bn of equity funds. They are among the           the fact that it is no longer possible to talk only in
                                                                                              as labour standards and greenhouse gas emissions,         top five investment groups in the UK. Add in Friends      terms of financial performance. This year sees the
                                     Insurance companies such as CGNU and other               just as financial analysts need financial information     Ivory & Sime, Hermes (which includes BT’s huge            launch of a series of SRI indices from FTSE
                                     mainstream fund managers such as Henderson are           and corporate governance officers need to see how         pension fund in its portfolio) and the Universities       International, the joint venture between the Financial
                                     now starting to see social and environmental issues      boards are behaving.                                      Superannuation Scheme (USS), and you have a               Times and the stock exchange, which runs a host of
  Roger Cowe is a writer             in a corporate governance context. Just as they                                                                    powerful force judging companies on social and            market standards such as the FTSE 100 index.
  specialising in social             expect board structures and practices to comply with     This kind of reporting to the SRI community needs to      environmental performance as well as financial
  and environmental                  the City’s Combined Code, they also expect               be taken just as seriously as conventional reporting.     results. Morley has announced that it will vote           They come under the banner FTSE4Good, and the UK
  aspects of business.
                                     companies to manage their impacts on society,            Financial analysts would not expect to be fobbed off      against companies’ annual reports which don’t             version will include only those members of the FTSE
                                     minimising the negative and maximising the               with generalisations about sales, profits and earnings    include some kind of environmental report.                All-Share index which meet social and
                                     positive.                                                per share. They want figures which can be relied on.                                                                environmental standards. This means even relatively
                                                                                                                                                        That force is bound to grow, partly because of the        small quoted companies will face the same sorts of
                                     The Combined Code was developed to encapsulate           The same applies to SRI analysts. They need to know       requirement for all pension funds to consider social,     questions as the multinationals.
                                     the corporate governance reforms of the 1990’s. It is    what companies have achieved, what their targets          environmental and ethical issues as part of their
                                     based on the realisation that the City needs more        are, and how they aim to get there. And as the ranks      annual investment policy review.                          Constituent companies will have to demonstrate
                                     than accounting standards and takeover rules to          of social responsibility investors grows, that means                                                                responsibility on human rights, stakeholder relations
                                     make sure companies are being run properly. It also      widespread reporting, probably as part of routine         Pension funds are terrified of excluding even             and environmental impact. Even the smaller
                                     needs clear rules setting out what is expected of        communications with shareholders.                         relatively small sectors of the stock market, as in the   companies in the grouping will need to be aware of
                                     companies.                                                                                                         traditional approach to ethical investment. But many      the issues, and have policies and management
                                                                                                                                                        will want to adopt some form of “engagement” – the        systems to deal with them. That includes measuring
                                     Investors also need to see that the companies whose                                                                term coined to describe the way investors raise           and reporting performance. It is a long way from the
                                     shares they own are following the rules, which                                                                     issues with the companies whose shares they hold.         profit and loss account and balance sheet which
                                     requires reporting of key information – such as                                                                                                                              used to form the centrepiece of the annual report,
                                     directors’ pay packages, and which directors make                                                                                                                            but companies which want to keep their
                                     the decisions on directors’ pay.                                                                                                                                             shareholders happy will need to make that journey.



                           ‘Companies have to face the fact that it
                           is no longer possible to talk only in
                           terms of financial performance.’




                                     Directions 2                                                                                                      Directions 3
HOW THE UK GOVERNMENT ENCOURAGES REPORTING
The UK government is serious about reporting and it is                                                                                                                                                           ‘As BP’s John Browne has said, the
                                                                                                                                                                                                                 enlightened company increasingly
encouraging companies to report. The prime minister                                                                                                                                                              recognises that there are good
                                                                                                                                                                                                                 commercial reasons for being ahead
now appears to view the environment as a business                                                                                                                                                                of the pack when it comes to issues
                                                                                                                                                                                                                 to do with the environment.’

priority.




2
                            Reporting has been emphasised by both the prime        Environmental performance indicators                               THE GOVERNMENT POSITION
                            minister, Tony Blair, and the environment minister,    The core of the report is made up of reporting on
                            Michael Meacher, who has named and shamed some         key environmental impacts, using acknowledged                      Taken from the prime minister’s speech to the              Taken from Michael Meacher’s speech at the ACCA
                            of those in the FTSE 350 who do not report.            indicators. For example, air emissions could be                    CBI/Green Alliance Conference on the Environment,          Environmental Reporting Awards, 23 March 2001.
                                                                                   reported in quantities of specific gases emitted (eg               24 October 2000.
                            The Department of Environment, Transport and the       volatile organic compounds and ozone depleters).                                                                              Now of course some companies may be starting to do
                            Regions (DETR) has published a set of three specific   Other impacts include: waste, water pollutants,                    As BP’s John Browne has said, the enlightened              the right thing but not reporting it. The message is
                            guidelines for reporting on greenhouse gas             energy use and land use. Impacts could also include                company increasingly recognises that there are good        you won’t be believed unless you are prepared to
                            emissions, waste and water. It has also issued draft   the use and disposal of products.                                  commercial reasons for being ahead of the pack when        demonstrate it, by being open in your reporting. If you
 Extracts from DETR’s       general guidelines on environmental reporting which                                                                       it comes to issues to do with the environment.             are doing it, please tell us.
 reporting guidelines and   explain simply how to produce a good quality basic     Improvement targets
 speeches by the prime      report - including key indicators to report against.   It is good practice to set and report targets to                   The City and investment community are beginning to         I would stress that there is no doubt that a new
 minister and Michael
 Meacher.
                                                                                   reduce impacts in each area. Wherever possible                     recognise the new commercial and environmental             business environment is emerging. A few examples of
                            The guidelines are targeted mainly at first-time       targets should be specific and quantified to a set                                                                            leadership help show the direction in which things are
                            reporters. The emphasis is on making incremental       timescale, challenging but achievable.                                                                                        moving.
                            steps, rather than trying to do everything at once.
                                                                                   Description of management systems                                                                                             The Advisory Committee on Business and the
                            No particular format is preferred and the DETR         A clear description of how you manage                       ‘…I am issuing a challenge,                                       Environment identified sustainable development as a
                            encourages reporters to choose either one or all       environmental issues and the people who are                                                                                   key issue for its work last year. In December, it
                            of these:                                              in charge.                                                  today, to all of the top 350                                      published a briefing paper entitled `Value, Growth,

                            • Environment section in the annual report             Legal compliance
                                                                                                                                               companies to be publishing                                        Success - how sustainable is your business?’ I urge all
                                                                                                                                                                                                                 senior managers to read it.
                              and accounts
                            • Stand-alone hard copy report
                                                                                   List of prosecutions (including fines and costs) for
                                                                                   infringing environmental laws.
                                                                                                                                               annual environment reports                                        Last year the FORGE group produced guidelines to
                            • Stand-alone web-based report.                                                                                    by the end of 2001.’                                              help the financial sector report on its environmental
                                                                                   Supply chain                                                                                                                  performance.
                            This is a summary of the draft guidelines.             Describe what you are doing to help ensure that
                                                                                   your suppliers are also acting to reduce the                                                                                  We recently heard that the new FTSE4Good socially
                            Organisation profile                                   environmental impact of their operations.                          realities, and to make money out of them. The return       responsible investment index will be launched in
                            This gives the reader an idea of who you are and                                                                          on equity of the new Dow Jones Sustainability Group        June. This joins other indices such as the Dow Jones
                            what you do, including an overview of operations,      Contact details for feedback                                       Index averaged 15%, compared to 8% for the regular         Sustainability Index and the Business in the
                            location of major sites, ownership, joint ventures,    Encourage readers to seek more information by                      index for the first half of this year. And more            Environment index of company environmental
                            turnover etc.                                          giving them the necessary details.                                 individual investors are choosing ethical investment       engagement. And the work of the Advisory Committee
                                                                                                                                                      portfolios which reflect their values. Legislation         on Consumer Products and the Environment has
                            CEO Statement                                          Full details and additional support material may be found          earlier this year on Statements of Investment              reinforced the need for companies to provide
                            Leadership message giving details of plans to          at www.environment.detr.gov.uk/envrp/index.htm.                    Principles required pension funds for the first time to    consumers with reliable information about the
                            improve the company’s environmental performance.                                                                          disclose whether they take ethical, environmental or       environmental impacts of products and services.
                                                                                                                                                      social factors into account in their decisions.
                            Environmental policy
                            Publish the full policy.                                                                                                  The World Business Council on Sustainable
                                                                                                                                                      Development, of which many of you here today are
                            Identify key environmental impacts                                                                                        members, is driving forward the agenda to increase
                            A report will contain typically between 4 and 10 key                                                                      the efficient use of resources. I would also like to see
                            impacts, depending on the nature of the business,                                                                         more reporting on environmental and social
                            dealt with separately later in the report.                                                                                performance. The pioneers of environmental reporting
                                                                                                                                                      - companies like BA, BT, British Gas, and BP - are
                                                                                                                                                      seeing increasing benefits from both improved
                                                                                                                                                      efficiencies and public image as a result. This is
                                                                                                                                                      something that all companies should be doing, and I
                                                                                                                                                      am issuing a challenge, today, to all of the top 350
                                                                                                                                                      companies to be publishing annual environment
                                                                                                                                                      reports by the end of 2001.



                            Directions 4                                                                                                             Directions 5
WHY SHELL REPORTS by Mark Wade (founder member of the Sustainable Development Group of Shell International)                                                                                                     Future

We believe that sustainable development and                                                                                                                                                                     This year, in response to readers’ requests, The Shell
                                                                                                                                                                                                                Report is shorter and more concise even though it
                                                                                                                                                                                                                contains additional economic, environmental and
stakeholder engagement is fundamental to the future                                                                                                                                                             social performance data. The level of verification has
                                                                                                                                                                                                                been increased and it contains the same frank

success of our business.                                                                                                                                                                                        coverage of issues, case studies, expert testimony
                                                                                                                                                                                                                and a wide range of ‘Tell Shell’ comments. For the
                                                                                                                                                                                                                first time this year a summary version was sent to
                                                                                                                                                                                                                shareholders along with a copy of the Annual Report
                                                                                                                                                                                                                and Accounts of the Parent Company of the Shell
                                                                                                                                                                                                                Group they invest in. Our aim is to fully integrate
                                                                                                                                                                                                                our reporting in future to satisfy the needs of
                                                                                                                                                                                                                shareholders and other stakeholders.

                                                                                                                                            ‘This is a world where                                              Business benefits
                                                                                                                                                                                                                We have a long tradition of doing things thoroughly
                                                                                                                                            there is an increasing                                              at Shell and find that it pays. We have spent a
                                                                                                                                                                                                                considerable amount of time, money and effort on
                                                                                                                                            demand for openness                                                 developing the necessary management systems,
                                                                                                                                            and transparency…’                                                  reporting, verification and communicating our
                                                                                                                                                                                                                progress.

                                                                                                                                                                                                                The SDMF offers business benefit in four key areas:
                                                                                                                                                                                                                • It helps reduce costs by encouraging eco-
                                                                                                                                                                                                                  efficiency (making less waste and doing more
                                                                                                                                                                                                                  with less)
                                                                                                                                                                                                                • Creating new opportunities by anticipating new
                                                                                                                                                                                                                  markets driven by customers who want a more




 3
                                               Shell has been successful for close on 100 years, but                                                  The Report showed an outline strategy - called a            sustainable world
                                               in the mid-1990’s we began to question our fitness                                                     Road Map - for bringing sustainable development           • Gaining customers – enhancing the brand by
                                               to face the challenges of the 21st century. Then in                                                    thinking into business activities. A practical tool was     providing products and services built on
                                               1995 the company received a wake-up call in the                                                        developed to implement the strategy - we called it          sustainability thinking
                                               form of the controversy surrounding the proposed                                                       the Sustainable Development Management                    • Reducing risk – managing risks better through
                                               sinking of the Brent Spar oil storage buoy deep in                                                     Framework (SDMF) – and Key Performance Indicators           responsible behaviour.
                                               the Atlantic. This, and the public reaction to Shell’s                                                 are being developed to chart progress and drive
                                               operations in Nigeria, highlighted the need to                                                         continuous improvement. Key elements of the SDMF          We believe that through the Shell Report and our
                                               engage with stakeholders and acted as a catalyst for                                                   include integration of economic, environmental and        commitment to openness and engagement, we are
 The Royal Dutch/ Shell Group of
                                               change.                                                                                                social considerations into decision-making, and           earning understanding and trust in many areas. This
 Companies - involved in the oil, gas,                                                                                                                engagement with people (including critics) inside         is leading to:
 chemicals and renewable energy business       We took a hard look at the way we managed our                                                          and outside of Shell.
 in over 130 countries worldwide -             businesses, especially in the light of the changing                                                                                                              • Co-operation and partnership with a broad range
 produced the first report on its              expectations society has of the role and behaviour of                                                 The Report is an integral part of a broader                  of non governmental organisations
 commitment to sustainable development
                                               multinationals. This is a world where there is an                                                     communications strategy, which includes a campaign         • Shell becoming the preferred choice of operator
 in 1998, called ‘The Shell Report - profits
 and principles, does there have to be a       increasing demand for openness and transparency,         The Shell Report 2000.                       to encourage dialogue on economic, social and                for many governments worldwide
 choice?’. Four years on, Shell is seen as a   and for companies to account for their                   ‘People, Planet & Profits’.                  environmental issues facing Shell, our industry and        • Attracting top talent
 leader in Corporate Social Responsibility     environmental and social responsibilities. Thus, the                                                  society at large. We use various media, including          • Aligning corporate values with those of our staff
 reporting, winning a number of awards,        Shell Report was born.                                                                                advertising and the internet. Our website includes a         and empowering our people to challenge
 including the ACCA/ISEA Social Reporting                                                                                                                ‘Tell-Shell’ facility that enables contributors to       traditional ways of working.
 Awards for 1999, ACCA Environmental
 Reporting Award for 2000, the European        The Report was the publicly visible part of a much                                                               have their views posted (no matter how
 Environmental Reporting Award for 2000        broader management strategy to ensure that Shell                                                                    frank or critical) or engage in active       The CSR benefit
 and the World Environment Center Gold         began to focus its efforts on contributing to                                                                           debate on our web ‘Forum’. We also       Each year the ‘Tell Shell’ facility receives some 1,000
 Medal Award for Environmental                 sustainable development. Given the size of Shell -                                          ‘Engagement                  undertake to respond personally to      messages by emails, letters and direct onto the
 Achievement for 2000.                         combined with the complexity of the concept of                                              provides…an                   those correspondents who would         Forum from correspondents all over the world.
                                               sustainable development - this is a huge undertaking                                     opportunity for us to             like a reply or who seek              Engagement provides not only a chance for Shell to
                                               and one that will take a considerable amount of                                           hear the views and                information.                         communicate on issues such as climate change or
                                               time to implement fully.                                                                 concerns of a society                                                   human rights, but also an opportunity for us to hear
                                                                                                                                         that makes up our                                                      the views and concerns of a society that makes up
                                                                                                                                      customers, shareholders                                                   our customers, shareholders and other stakeholders.
                                                                                                                                              and other
                                                                                                                                           stakeholders.’                                                       The Report, for all its high profile, is only a report. Its
                                                                                                                                                                                                                true significance lies in the underlying performance
                                                                                                                                                                                                                it represents and our continuous efforts to live up to
                                                                                                                                                                                                                our Business Principles and the commitments to
                                                                                                                                                                                                                sustainable development and human rights that they
                                                                                                                                                                                                                contain.




                                               Directions 6                                                                                         Directions 7
REASONS FOR THE 97 TO TAKE THE PLUNGE by Simon Propper and Peter Knight
                                                                                                                                            Top 10 Dos                                         Top Five Don’ts
Almost half of the UK’s biggest 200 companies do not                                                                                        • Do it! It can be difficult for beginners, but    • Don’t follow guidelines slavishly. Pick and
                                                                                                                                              the right report will silence your critics and     mix - focus on what’s important to you and
report on their social or environmental performance.                                                                                          bring business benefits.
                                                                                                                                            • Make sure your corporate values are
                                                                                                                                                                                                 be bold enough to say why.
                                                                                                                                                                                               • Don’t spin. Credibility comes from being open
                                                                                                                                              conveyed.                                          and honest.
                                                                                                                                            • Research your audience - don’t be afraid to      • Don’t expect to produce your best report first
                                                                                                                                              ask them what they want to hear. Then focus        time.
                                                                                                                                              on their needs.                                  • Don’t spend too much money - keep it
                                                                                                                                            • Use the most appropriate medium or a               simple.
                                                                                                                                              combination of media. Some people, such as       • Don’t try reporting if you have nothing to
                                                                                                                                              regulators, still like paper while campaigners     report - the document must reflect a
                                                                                                                                              are happy with the web.                            broader business initiative.
                              Despite six years of government encouragement          This concern is certainly valid. Environmental         • Use the web, but keep websites short, clear




 4
                              (the Conservatives supported reporting too) and a      reporting and the management systems designed            and to the point.
                              decade of peer pressure, our survey shows that 97      to control environmental impacts are geared for
                                                                                                                                            • Be concise and clear. We all have too much
                              of the FTSE 200 resist all reporting demands from      big polluters. How can the same standards be
                              stakeholders, such as socially responsible             suitable for banks, television companies and others      to read, keep it short.
                              investment funds, pressure groups, business            offering a service? These companies have relatively    • Write plain English avoiding technical terms
                              customers and benchmarking organisations.              few environmental impacts and do not need a full         and company spin - you’ll make more
                                                                                     ISO 14001 management system to manage their              friends.
                              Reasons for their reticence are many and varied.       paper clip consumption. Neither should they
                              Many boards still reject the idea of business          feel obligated to comply with the GRI dictats
                                                                                                                                            • Show commitment to improve.
 Simon Propper and            engaging with any interest group other than those      on reporting.                                          • Be confident but open to criticism.
 Peter Knight are directors
 of the consultancy
                              who own shares. They stick to the narrow and now                                                              • Treat your report as you would any product.
 Environmental Context.       rather outdated idea that the only responsibility of   Other than a simple fear of engaging with the            Constantly look for ways to distribute it.
                              business is to comply with the law and pay             broader society, we feel the main barrier to             Market it. And then market it again.
                              dividends to investors. The board’s social             reporting is the difficulty that companies find in
                              responsibility ends, according to this view, when      identifying the benefits. “Why bother?” ask many.
                              the company pays its tax bill.                         Indeed, why should those businesses that are not
                                                                                     in the public gaze, will never have Greenpeace
                              Several companies told us they deeply resented         snorkeling up their outfall, don’t own consumer
                              attempts by government and organisations such as       brands and don’t exploit children in far-away                                                  ‘Beginners say they are offered
                              the charity Business in the Environment (BiE) -
                              which ranks companies on their environmental
                                                                                     places report?                                                                                  little advice on how to take the
                              performance - to browbeat them into reporting.         Having worked on about 100 reports across most                                                  first step. Those that are brave
                              They consider such gratuitous reporting as merely
                              scratching the backs of politicians and do-gooders.
                                                                                     sectors we have witnessed the frustrations clients
                                                                                     feel. But more important: we have seen how the
                                                                                                                                                                                   enough to venture out fear being
                                                                                     business can benefit. Other than a boost to the                                                 marked down by indexers… if
                              Those who accept that they should acknowledge          company’s reputation (including the often-ignored
                              the needs of a wider constituency complain about       perception of employees about their employer),                                                       they fail to produce a triple
                              the inflexibility of existing reporting guidelines.    the main kickback is the understanding that                                                       salchow first time on the ice.’
                              Many find the Global Reporting Initiative (GRI) and    management can get on the implications of
                              previous prescriptions from the United Nations         their actions.
                              Environment Programme (UNEP) just too
                              complicated and demanding.                             This can lead to simple cost savings but more
                                                                                     significantly, it can deliver the data that enables
                              Beginners say they are offered little advice on how    management to make real bottom-line efficiencies.      Top Ten Benefits
                              to take the first step. Those that are brave enough    These are things that excite the all-important         Reporting:
                              to venture out fear being marked down by indexers      shareholders: reduced energy consumption (have
                              such as BiE if they fail to produce a triple salchow   you seen the price of oil lately?), safer working      • Helps convey your values.                        • Reassures employees.
                              first time on the ice.                                 practices (death and disease is expensive), happier    • Improves the reputation of the company           • Attracts investment from ethical and green
                                                                                     workforce (stress and disillusionment can be             among important interest groups such as            funds.
                              To be fair, some of these concerns are being           costly), better legal compliance (fines are not          employees, opinion formers and pressure          • Helps to collect the information demanded
                              addressed by the UK government’s General               cheap) and so on.                                        groups.                                            by an increasing number of mainstream
                              Guidelines on Environmental Reporting (see page 4),
                              a commendably practical approach to the issue          The function of reports is to communicate these        • Helps recruit better people (who wants to          investors (including pension funds and
                              and an excellent place for rookies to start.           benefits to a broader audience, while also helping       work for a dirty, socially irresponsible           insurance companies).
                                                                                     people understand the softer but all-important           company?).                                       • Helps identify inefficiencies.
                              If the 97 - many are service companies - are to take   constituent of a business: its values.                 • Gives staff the credibility to engage with       • Is a catalyst for generating management
                              their first steps then something will have to be
                                                                                                                                              regulators and policy makers.                      information which can save waste and
                              done to encourage the service industry to feel more    Opposite is a list of benefits and some dos and
                              comfortable about reporting. “Why,” asks an insurer,   don’ts for the first-time reporter. The water has      • Reassures corporate customers and others in        reduce costs.
                              “should we have to follow reporting standards          never been warmer - it’s time for the 97 to take         your supply chain (especially those with
                              designed for a giant chemicals company?”               the plunge.                                              strong values of their own).


                              Directions 8                                                                                                 Directions 9
REPORTING IS ONE THING, COMMUNICATING
EFFECTIVELY IS QUITE ANOTHER by Nigel Salter
As most major organisations will testify, developing
an environmental and CSR reporting process is no
small task, especially for businesses approaching the
issues for the first time.
                             With all the effort put into getting a reporting          It seems to me that all the effort put into generating      2. The second real drawback of the internet is the        The internet has encouraged far greater quantity of
                             process together it is perhaps somewhat harsh to          the content for the reporting processes deserves better.       fact that publishing a report on the web does          reporting and this should be welcomed. It is not,
                             then criticise the quality of the reports that actually                                                                  absolutely nothing by way of pro-actively arguing      however, improving the quality of communication
                             are produced. But a look around at many of the            Having said this, the discipline as a whole is                 a company’s position on these issues or bringing       and this fact should not be ignored by those
                             reports (both printed and web-based) leads me, and        undoubtedly maturing and the tools for                         the debate to a broader audience.                      companies that wish to communicate with their
                             must lead the audiences, to think that a lot of the       communicating are becoming more sophisticated.                                                                        audiences as opposed to simply making data
                             effort is wasted.                                                                                                        The fundamental problem is that it does not            available.
                                                                                       Perhaps the most influential driver of change has              reach out to new audiences - an internet report
                             If you’re going to the lengths of creating the            been the internet as it has allowed far more                   is a depository of information for those who are       This is also where we should be slightly critical of
                             processes, gathering the data, following the              information to be published and has encouraged                 already interested or those just passing through       the drive to standardise reporting. The intention to
                             guidelines, verifying the information and writing         many organisations to begin reporting to some                  by chance. It is not an active, persuasive             simplify and create guidelines that enable
                             the report, surely it’s absolutely vital to ensure the    degree.                                                        communication tool.                                    comparability is obviously desirable, not least to aid
                             messages you want to communicate do actually                                                                                                                                    SRI analysis. But the danger is that an obsession
                             get through.                                              Unfortunately, however, the internet is not                                                                           with the standards will stifle innovation and
                                                                                       necessarily adding much to the quality of                                                                             effectiveness. It could be argued that the more




5
                             Why is it then, that reports from many of the UK’s        information being published. On the contrary, there                                                                   sophisticated businesses in this field are not those
                             major corporations are of such poor quality in terms      are two very distinct problems.                              ‘The danger is that an                                   with the best technical reports and processes. It
                             of writing, communication and presentation?                                                                                                                                     seems to me that the companies that are engaging
                                                                                       1. The first is that many companies appear to be             obsession with the                                       in this field most effectively are those who regard
                             Many of these companies spend enormous amounts of
                             money on their annual reports and other corporate
                                                                                          using the internet as something of a ‘cop-out’.
                                                                                          They feel that the easiest way to relieve some of
                                                                                                                                                    standards will stifle                                    the report as a means and not an end in itself. They
                                                                                                                                                                                                             see it as a key communications vehicle but not the
                             communications. And yet their environment and CSR            the pressure from the various groups looking for          innovation and                                           only one. The innovation and effectiveness comes
                             publications appear not to be taken seriously enough         information in this area is simply to ‘put                                                                         from what they do in addition to a standard report -
                             to merit any real care or consideration, despite the         something on the website’.
                                                                                                                                                    effectiveness.’                                          be it analyst presentations, online forums or staff
Nigel Salter is a director   fact that in many instances the very issue at stake is                                                                                                                          communications programmes.
of design consultancy        that of corporate reputation.                                The quality of this information, its relevance and
salterbaxter which he
founded with Penny Baxter.
                                                                                          effectiveness and indeed the quality of the                                                                        Let us not forget that the end objective is not
                             The reports are all too frequently technically or            management processes behind it do not always             This is where I believe many companies have gone          necessarily for all businesses to produce a standard
                             almost academically focused (particularly the more           stand up to close scrutiny.                              too far in adopting the internet as the main medium       report on their environmental and CSR performance.
                             environmentally based reports) and appear to have                                                                     for reporting. It is practical and easy but it neglects
                             been conceived without an assessment of audience                                                                      new audiences, audiences who need to be surprised         The objective is for business to address these issues
                             and message.                                                                                                          and also entire constituencies who either don’t have      effectively and to engage with all stakeholders and
                                                                                                                                                   access to the internet or are disinclined to use it.      constituencies in a dialogue.
                                                                                                                                                   And here I am not talking about peripheral
                                                                                                                                                   audiences. I am talking about Chief Executives,           Reporting itself is merely a signal that the dialogue
                                                                                                                                                   Chairmen and business leaders who simply would            is starting. This dialogue will only become truly
                                                                                                                                                   not choose to go and look at a company’s website          worthwhile when businesses place as much value on
                                                                                                                                                   but who may well respond positively to an effective       getting their message across as on the quality of
                                                                                                                                                   piece of printed communication that they can carry        their technical systems and data.
                                                                                                                                                   and read on a train journey or that might grab their
                                                                                                                                                   attention at their desk.
                                                                                              ‘Companies appear to be
                                                                                              using the internet as
                                                                                              something of a ‘cop-out’…



                                                                                                                …it is not an
                                                                                                                active, persuasive
                                                                                                                communication tool.’


                             Directions 10                                                                                                        Directions 11
ANALYSIS – OVERVIEW




Methodology


The data published in this document was gathered through telephone discussions with the
relevant people in each company and by consulting company reports and websites. We have
done our utmost to ensure that all information is confirmed by the organisation and in only
three cases the companies chose not to participate and respond.

Our FT-SE 200 listing is taken from the Financial Times data published on Friday 11 May 2001,
ranking companies by market capitalisation.

For accuracy this date has also been used as the cut-off point for data gathering. This may
mean that some companies have published reports or information since that date. We have
signalled this in all such cases that were brought to our attention.

We have not included investment trust companies in our sample as they tend not to be
regarded as ‘trading companies’ but rather they invest in the assets of other ‘trading
companies’. This view is open to debate and we would welcome feedback for future editions.

The places of the two companies excluded on this basis have been taken by
the companies ranked 201 and 202 on the same date.




CATEGORIES FOR RESEARCH
                                                                               KEY TO ABBREVIATIONS

A full environment report
                                                                               ACCA    The Association of Certified Chartered
A full environment report is defined as a report that:
                                                                                       Accountants

•   identifies the main environmental impacts of the company
                                                                               AR      Annual Report
•   contains data on those impacts
•
•
    reports on actions taken in relation to the impacts
    identifies and discusses targets and programmes for the future.
                                                                               BiE     Business in the Environment                 companies disclose no substantive environmental
We are also treating a report that covers Health, Safety and Environment
                                                                               CSR     Corporate Social Responsibility             or CSR information.
as a full report.
                                                                               DETR    Department of the Environment,
                                                                                       Transport and the Regions
Section in the annual report



                                                                                                                                   54
We have defined this on the basis that it needs to be a stand alone section
                                                                               EMS     Environmental Management System
and not simply a paragraph in running copy or a few lines in corporate
governance or the Directors’ report. As this is the hardest area to classify
                                                                                                                                               companies produce stand-alone full reports.
                                                                               GRI     Global Reporting Initiative
consistently we have qualified our assessment of these sections with
comments or more detailed descriptions.
                                                                               PERI    Public Environmental Reporting Initiative

Guidelines


                                                                                                                                   103
                                                                               SHE     Safety Health and Environment
We have aimed not to prompt in this area but have asked people if they
are aware of the GRI or DETR guidelines if no information has been
                                                                               UNEP    United Nations Environment Programme
                                                                                                                                                   companies report in full or in the Annual Report.
immediately offered.

Independent verification statement
We have taken a rigorous approach to this definition but have signalled,
where possible, where other forms of audit or assurance are used.
                                                                                                                                              companies reported for the first time this year and 16 others
                                                                                                                                   16         stated their intent to report this year for the first time.


                                         Directions 12                                                                             Directions 13
ANALYSIS




28   companies have been reporting for 3 years and over.
     19 companies have been reporting for over 5 years and
     British Airways have reported for 10 years.
                                                                                                                                                                 “GRI is fine as reference, but
                                                                                                                                                                  it’s impossible to apply to a
                                                                                                                                                                  multinational business with
     (This does not include the now transformed and/or de-merged ex-public utilities).
                                                                                                                                                                         multiple operations in
                                                                                                                                                                            multiple cultures.”

                                                                                              20       companies refer to the GRI guidelines.
                                                                                                       The key word here is ‘refer’. The awareness of the Global Reporting Initiative seems
                                                                                                       to be good. But referring to guidance is one thing, actually following guidelines
                                                                                                       appears to be quite another. The general comment appears to be ‘useful but too
                                                                                                       inflexible’.
                                               “ I simply don’t see the point
                                                 in verifying data that has
                                                 already been verified for                    14       companies refer to the DETR guidelines.
                                                                                                       The Department of Environment, Transport and the Regions’ guidelines appear to
                                                                                                       have been well received but not widely enough disseminated. The two documents
                                                 ISO 14001.”                                           that companies expressed positive views about were the ‘Getting Started’ guide and
                                                                                                       the guidance on greenhouse gas emissions. (‘Helpful and easy to follow’).


30   companies have an independent verification statement.
     The value of independent verification appears uncertain. Companies appear to feel
     that it represents too great an expense for too little obvious benefit. There is no      04       companies refer to other guidelines.
     doubt that independent assessment adds credibility to a report but the jury is
     obviously still out.




                                                                                              There is a clear trend towards including CSR issues in environment reports.
                                                                                              This is illustrated by the diversity of titles, although the content does not always fulfil the
                                                                                              promise on the cover.


36   companies publish full printed reports.
     More are expected in the next 12 months.
                                                                                              AWG – ‘Environment and Community Report’.
                                                                                              BAA – ‘Sustainability Report’.
                                                                                              Billiton – ‘HSE and Communities Annual Report’.

10   companies report on the web only.
     This figure is surprisingly low. The web has certainly not taken over but, again, next
     year’s figures should prove more enlightening.
                                                                                              Diageo – ‘Corporate Citizenship’.
                                                                                              Railtrack – ‘Corporate Sustainability Report’.
                                                                                              Royal and Sun Alliance – ‘Environmental, Health, Safety and Community Report’.
                                                                                              Severn Trent – ‘Stewardship Report’.

42   companies have combined printed and web-based reports.
     It is encouraging to see that the majority of reporters still recognise the value of
     printed communication in engaging with their audiences.
                                                                                              Shell – ‘The Shell Report. People, Planet & Profits’.
                                                                                              United Utilities – ‘Social and Environmental Impact Report’.




                               Directions 14                                                                                  Directions 15
Directions 1
Directions 1
Directions 1
Directions 1
Directions 1
Directions 1
Directions 1

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Directions 1

  • 1. 100 90 90˚ 80 70 60 80˚ 50 40 70˚ 30 An analysis of the environmental and corporate Directions in Environmental and social responsibility (CSR) reporting practices of CSR Reporting 2000/01 the UK’s top 200 companies. 20 With commentary and analysis from: 60˚ • Roger Cowe – Journalist • Mark Wade – Shell • Simon Propper and Peter Knight – Researched and published by Environmental Context • Nigel Salter – salterbaxter 50˚ 40˚
  • 2. Environmental and corporate social responsibility (CSR) reporting has evolved substantially over the last decade. There is no doubt that the concepts of environmental performance, corporate responsibility and sustainability are now, at the very least, being discussed at board level in major corporations. Government pressure, demands from the investment community, growth in private share ownership, high profile environmental stories and the increasingly demonstrable business benefits have all contributed to the issues moving up the agenda for discussion. But a lot of it is just that - discussion. The underlying direction that reporting is taking is still unclear. Outside the heavily regulated industries that have dealt with these issues for years companies are unsure how to engage with the debate. It seemed to us that it was time to establish the real state of environment and CSR reporting in the UK’s top companies. We are not being judgmental but merely recording what companies are doing. Indeed, one of the clearest messages to emerge from our research is that those who are just beginning to address CSR are discouraged by the judgmental approaches and ‘scoring’ techniques of the Contents benchmarking organisations. 1 Introduction 12 Methodology This survey records and analyses where companies have got to in the 2 Roger Cowe: 13 Analysis – overview Investors need information. field of reporting. We discuss through the articles and commentary 14 Analysis 4 How the UK government encourages 16 Analysis by sector some of the practical views and the issues involved with reporting in reporting. 19 Looking forward the real world of business. 6 Mark Wade: Why Shell reports. 20 International overview 8 Simon Propper and Peter Knight: 22 Data UK top 200 This is the first edition of this research document. We plan to publish Reasons to take the plunge. every year, expanding our scope and identifying emerging trends. 10 Nigel Salter: Reporting is one thing, communicating effectively is quite another. Your feedback would be most welcome. Nigel Salter Simon Propper salterbaxter Environmental Context nsalter@salterbaxter.com simonp@econtext.co.uk Directions 1
  • 3. INVESTORS NEED INFORMATION by Roger Cowe More than £3bn is now invested in ethical funds – unit trusts and similar vehicles for collective investment, which exclude certain unacceptable industries or ‘This year sees the launch of a series of SRI indices from FTSE International… activities or focus on benign areas of the economy. they come under the banner FTSE4Good, and the UK version will include only those members of the FTSE All-Share index which meet social and environmental standards.’ 1 Ethical investment is the best-known face of the The same applies to social responsibility. Socially The audience is growing rapidly, and is already a Few pension funds will go as far as USS, which is “concerned shareholder”. But it is just the tip of the responsible investors are no different in needing long way from the niche market of retail ethical incorporating these issues into its routine investment iceberg of socially responsible investment (SRI) and information on which to base their investment investors. Henderson and CGNU’s fund management management. But many will ask their fund managers can give a misleading impression of what such decisions. They need to know what companies’ arm, Morley Fund Management, each speak for to “engage” to some extent. Companies have to face shareholders want from their investments. policies are, how they are performing in areas such about £70bn of equity funds. They are among the the fact that it is no longer possible to talk only in as labour standards and greenhouse gas emissions, top five investment groups in the UK. Add in Friends terms of financial performance. This year sees the Insurance companies such as CGNU and other just as financial analysts need financial information Ivory & Sime, Hermes (which includes BT’s huge launch of a series of SRI indices from FTSE mainstream fund managers such as Henderson are and corporate governance officers need to see how pension fund in its portfolio) and the Universities International, the joint venture between the Financial now starting to see social and environmental issues boards are behaving. Superannuation Scheme (USS), and you have a Times and the stock exchange, which runs a host of Roger Cowe is a writer in a corporate governance context. Just as they powerful force judging companies on social and market standards such as the FTSE 100 index. specialising in social expect board structures and practices to comply with This kind of reporting to the SRI community needs to environmental performance as well as financial and environmental the City’s Combined Code, they also expect be taken just as seriously as conventional reporting. results. Morley has announced that it will vote They come under the banner FTSE4Good, and the UK aspects of business. companies to manage their impacts on society, Financial analysts would not expect to be fobbed off against companies’ annual reports which don’t version will include only those members of the FTSE minimising the negative and maximising the with generalisations about sales, profits and earnings include some kind of environmental report. All-Share index which meet social and positive. per share. They want figures which can be relied on. environmental standards. This means even relatively That force is bound to grow, partly because of the small quoted companies will face the same sorts of The Combined Code was developed to encapsulate The same applies to SRI analysts. They need to know requirement for all pension funds to consider social, questions as the multinationals. the corporate governance reforms of the 1990’s. It is what companies have achieved, what their targets environmental and ethical issues as part of their based on the realisation that the City needs more are, and how they aim to get there. And as the ranks annual investment policy review. Constituent companies will have to demonstrate than accounting standards and takeover rules to of social responsibility investors grows, that means responsibility on human rights, stakeholder relations make sure companies are being run properly. It also widespread reporting, probably as part of routine Pension funds are terrified of excluding even and environmental impact. Even the smaller needs clear rules setting out what is expected of communications with shareholders. relatively small sectors of the stock market, as in the companies in the grouping will need to be aware of companies. traditional approach to ethical investment. But many the issues, and have policies and management will want to adopt some form of “engagement” – the systems to deal with them. That includes measuring Investors also need to see that the companies whose term coined to describe the way investors raise and reporting performance. It is a long way from the shares they own are following the rules, which issues with the companies whose shares they hold. profit and loss account and balance sheet which requires reporting of key information – such as used to form the centrepiece of the annual report, directors’ pay packages, and which directors make but companies which want to keep their the decisions on directors’ pay. shareholders happy will need to make that journey. ‘Companies have to face the fact that it is no longer possible to talk only in terms of financial performance.’ Directions 2 Directions 3
  • 4. HOW THE UK GOVERNMENT ENCOURAGES REPORTING The UK government is serious about reporting and it is ‘As BP’s John Browne has said, the enlightened company increasingly encouraging companies to report. The prime minister recognises that there are good commercial reasons for being ahead now appears to view the environment as a business of the pack when it comes to issues to do with the environment.’ priority. 2 Reporting has been emphasised by both the prime Environmental performance indicators THE GOVERNMENT POSITION minister, Tony Blair, and the environment minister, The core of the report is made up of reporting on Michael Meacher, who has named and shamed some key environmental impacts, using acknowledged Taken from the prime minister’s speech to the Taken from Michael Meacher’s speech at the ACCA of those in the FTSE 350 who do not report. indicators. For example, air emissions could be CBI/Green Alliance Conference on the Environment, Environmental Reporting Awards, 23 March 2001. reported in quantities of specific gases emitted (eg 24 October 2000. The Department of Environment, Transport and the volatile organic compounds and ozone depleters). Now of course some companies may be starting to do Regions (DETR) has published a set of three specific Other impacts include: waste, water pollutants, As BP’s John Browne has said, the enlightened the right thing but not reporting it. The message is guidelines for reporting on greenhouse gas energy use and land use. Impacts could also include company increasingly recognises that there are good you won’t be believed unless you are prepared to emissions, waste and water. It has also issued draft the use and disposal of products. commercial reasons for being ahead of the pack when demonstrate it, by being open in your reporting. If you Extracts from DETR’s general guidelines on environmental reporting which it comes to issues to do with the environment. are doing it, please tell us. reporting guidelines and explain simply how to produce a good quality basic Improvement targets speeches by the prime report - including key indicators to report against. It is good practice to set and report targets to The City and investment community are beginning to I would stress that there is no doubt that a new minister and Michael Meacher. reduce impacts in each area. Wherever possible recognise the new commercial and environmental business environment is emerging. A few examples of The guidelines are targeted mainly at first-time targets should be specific and quantified to a set leadership help show the direction in which things are reporters. The emphasis is on making incremental timescale, challenging but achievable. moving. steps, rather than trying to do everything at once. Description of management systems The Advisory Committee on Business and the No particular format is preferred and the DETR A clear description of how you manage ‘…I am issuing a challenge, Environment identified sustainable development as a encourages reporters to choose either one or all environmental issues and the people who are key issue for its work last year. In December, it of these: in charge. today, to all of the top 350 published a briefing paper entitled `Value, Growth, • Environment section in the annual report Legal compliance companies to be publishing Success - how sustainable is your business?’ I urge all senior managers to read it. and accounts • Stand-alone hard copy report List of prosecutions (including fines and costs) for infringing environmental laws. annual environment reports Last year the FORGE group produced guidelines to • Stand-alone web-based report. by the end of 2001.’ help the financial sector report on its environmental Supply chain performance. This is a summary of the draft guidelines. Describe what you are doing to help ensure that your suppliers are also acting to reduce the We recently heard that the new FTSE4Good socially Organisation profile environmental impact of their operations. realities, and to make money out of them. The return responsible investment index will be launched in This gives the reader an idea of who you are and on equity of the new Dow Jones Sustainability Group June. This joins other indices such as the Dow Jones what you do, including an overview of operations, Contact details for feedback Index averaged 15%, compared to 8% for the regular Sustainability Index and the Business in the location of major sites, ownership, joint ventures, Encourage readers to seek more information by index for the first half of this year. And more Environment index of company environmental turnover etc. giving them the necessary details. individual investors are choosing ethical investment engagement. And the work of the Advisory Committee portfolios which reflect their values. Legislation on Consumer Products and the Environment has CEO Statement Full details and additional support material may be found earlier this year on Statements of Investment reinforced the need for companies to provide Leadership message giving details of plans to at www.environment.detr.gov.uk/envrp/index.htm. Principles required pension funds for the first time to consumers with reliable information about the improve the company’s environmental performance. disclose whether they take ethical, environmental or environmental impacts of products and services. social factors into account in their decisions. Environmental policy Publish the full policy. The World Business Council on Sustainable Development, of which many of you here today are Identify key environmental impacts members, is driving forward the agenda to increase A report will contain typically between 4 and 10 key the efficient use of resources. I would also like to see impacts, depending on the nature of the business, more reporting on environmental and social dealt with separately later in the report. performance. The pioneers of environmental reporting - companies like BA, BT, British Gas, and BP - are seeing increasing benefits from both improved efficiencies and public image as a result. This is something that all companies should be doing, and I am issuing a challenge, today, to all of the top 350 companies to be publishing annual environment reports by the end of 2001. Directions 4 Directions 5
  • 5. WHY SHELL REPORTS by Mark Wade (founder member of the Sustainable Development Group of Shell International) Future We believe that sustainable development and This year, in response to readers’ requests, The Shell Report is shorter and more concise even though it contains additional economic, environmental and stakeholder engagement is fundamental to the future social performance data. The level of verification has been increased and it contains the same frank success of our business. coverage of issues, case studies, expert testimony and a wide range of ‘Tell Shell’ comments. For the first time this year a summary version was sent to shareholders along with a copy of the Annual Report and Accounts of the Parent Company of the Shell Group they invest in. Our aim is to fully integrate our reporting in future to satisfy the needs of shareholders and other stakeholders. ‘This is a world where Business benefits We have a long tradition of doing things thoroughly there is an increasing at Shell and find that it pays. We have spent a considerable amount of time, money and effort on demand for openness developing the necessary management systems, and transparency…’ reporting, verification and communicating our progress. The SDMF offers business benefit in four key areas: • It helps reduce costs by encouraging eco- efficiency (making less waste and doing more with less) • Creating new opportunities by anticipating new markets driven by customers who want a more 3 Shell has been successful for close on 100 years, but The Report showed an outline strategy - called a sustainable world in the mid-1990’s we began to question our fitness Road Map - for bringing sustainable development • Gaining customers – enhancing the brand by to face the challenges of the 21st century. Then in thinking into business activities. A practical tool was providing products and services built on 1995 the company received a wake-up call in the developed to implement the strategy - we called it sustainability thinking form of the controversy surrounding the proposed the Sustainable Development Management • Reducing risk – managing risks better through sinking of the Brent Spar oil storage buoy deep in Framework (SDMF) – and Key Performance Indicators responsible behaviour. the Atlantic. This, and the public reaction to Shell’s are being developed to chart progress and drive operations in Nigeria, highlighted the need to continuous improvement. Key elements of the SDMF We believe that through the Shell Report and our engage with stakeholders and acted as a catalyst for include integration of economic, environmental and commitment to openness and engagement, we are The Royal Dutch/ Shell Group of change. social considerations into decision-making, and earning understanding and trust in many areas. This Companies - involved in the oil, gas, engagement with people (including critics) inside is leading to: chemicals and renewable energy business We took a hard look at the way we managed our and outside of Shell. in over 130 countries worldwide - businesses, especially in the light of the changing • Co-operation and partnership with a broad range produced the first report on its expectations society has of the role and behaviour of The Report is an integral part of a broader of non governmental organisations commitment to sustainable development multinationals. This is a world where there is an communications strategy, which includes a campaign • Shell becoming the preferred choice of operator in 1998, called ‘The Shell Report - profits and principles, does there have to be a increasing demand for openness and transparency, The Shell Report 2000. to encourage dialogue on economic, social and for many governments worldwide choice?’. Four years on, Shell is seen as a and for companies to account for their ‘People, Planet & Profits’. environmental issues facing Shell, our industry and • Attracting top talent leader in Corporate Social Responsibility environmental and social responsibilities. Thus, the society at large. We use various media, including • Aligning corporate values with those of our staff reporting, winning a number of awards, Shell Report was born. advertising and the internet. Our website includes a and empowering our people to challenge including the ACCA/ISEA Social Reporting ‘Tell-Shell’ facility that enables contributors to traditional ways of working. Awards for 1999, ACCA Environmental Reporting Award for 2000, the European The Report was the publicly visible part of a much have their views posted (no matter how Environmental Reporting Award for 2000 broader management strategy to ensure that Shell frank or critical) or engage in active The CSR benefit and the World Environment Center Gold began to focus its efforts on contributing to debate on our web ‘Forum’. We also Each year the ‘Tell Shell’ facility receives some 1,000 Medal Award for Environmental sustainable development. Given the size of Shell - ‘Engagement undertake to respond personally to messages by emails, letters and direct onto the Achievement for 2000. combined with the complexity of the concept of provides…an those correspondents who would Forum from correspondents all over the world. sustainable development - this is a huge undertaking opportunity for us to like a reply or who seek Engagement provides not only a chance for Shell to and one that will take a considerable amount of hear the views and information. communicate on issues such as climate change or time to implement fully. concerns of a society human rights, but also an opportunity for us to hear that makes up our the views and concerns of a society that makes up customers, shareholders our customers, shareholders and other stakeholders. and other stakeholders.’ The Report, for all its high profile, is only a report. Its true significance lies in the underlying performance it represents and our continuous efforts to live up to our Business Principles and the commitments to sustainable development and human rights that they contain. Directions 6 Directions 7
  • 6. REASONS FOR THE 97 TO TAKE THE PLUNGE by Simon Propper and Peter Knight Top 10 Dos Top Five Don’ts Almost half of the UK’s biggest 200 companies do not • Do it! It can be difficult for beginners, but • Don’t follow guidelines slavishly. Pick and the right report will silence your critics and mix - focus on what’s important to you and report on their social or environmental performance. bring business benefits. • Make sure your corporate values are be bold enough to say why. • Don’t spin. Credibility comes from being open conveyed. and honest. • Research your audience - don’t be afraid to • Don’t expect to produce your best report first ask them what they want to hear. Then focus time. on their needs. • Don’t spend too much money - keep it • Use the most appropriate medium or a simple. combination of media. Some people, such as • Don’t try reporting if you have nothing to regulators, still like paper while campaigners report - the document must reflect a are happy with the web. broader business initiative. Despite six years of government encouragement This concern is certainly valid. Environmental • Use the web, but keep websites short, clear 4 (the Conservatives supported reporting too) and a reporting and the management systems designed and to the point. decade of peer pressure, our survey shows that 97 to control environmental impacts are geared for • Be concise and clear. We all have too much of the FTSE 200 resist all reporting demands from big polluters. How can the same standards be stakeholders, such as socially responsible suitable for banks, television companies and others to read, keep it short. investment funds, pressure groups, business offering a service? These companies have relatively • Write plain English avoiding technical terms customers and benchmarking organisations. few environmental impacts and do not need a full and company spin - you’ll make more ISO 14001 management system to manage their friends. Reasons for their reticence are many and varied. paper clip consumption. Neither should they Many boards still reject the idea of business feel obligated to comply with the GRI dictats • Show commitment to improve. Simon Propper and engaging with any interest group other than those on reporting. • Be confident but open to criticism. Peter Knight are directors of the consultancy who own shares. They stick to the narrow and now • Treat your report as you would any product. Environmental Context. rather outdated idea that the only responsibility of Other than a simple fear of engaging with the Constantly look for ways to distribute it. business is to comply with the law and pay broader society, we feel the main barrier to Market it. And then market it again. dividends to investors. The board’s social reporting is the difficulty that companies find in responsibility ends, according to this view, when identifying the benefits. “Why bother?” ask many. the company pays its tax bill. Indeed, why should those businesses that are not in the public gaze, will never have Greenpeace Several companies told us they deeply resented snorkeling up their outfall, don’t own consumer attempts by government and organisations such as brands and don’t exploit children in far-away ‘Beginners say they are offered the charity Business in the Environment (BiE) - which ranks companies on their environmental places report? little advice on how to take the performance - to browbeat them into reporting. Having worked on about 100 reports across most first step. Those that are brave They consider such gratuitous reporting as merely scratching the backs of politicians and do-gooders. sectors we have witnessed the frustrations clients feel. But more important: we have seen how the enough to venture out fear being business can benefit. Other than a boost to the marked down by indexers… if Those who accept that they should acknowledge company’s reputation (including the often-ignored the needs of a wider constituency complain about perception of employees about their employer), they fail to produce a triple the inflexibility of existing reporting guidelines. the main kickback is the understanding that salchow first time on the ice.’ Many find the Global Reporting Initiative (GRI) and management can get on the implications of previous prescriptions from the United Nations their actions. Environment Programme (UNEP) just too complicated and demanding. This can lead to simple cost savings but more significantly, it can deliver the data that enables Beginners say they are offered little advice on how management to make real bottom-line efficiencies. Top Ten Benefits to take the first step. Those that are brave enough These are things that excite the all-important Reporting: to venture out fear being marked down by indexers shareholders: reduced energy consumption (have such as BiE if they fail to produce a triple salchow you seen the price of oil lately?), safer working • Helps convey your values. • Reassures employees. first time on the ice. practices (death and disease is expensive), happier • Improves the reputation of the company • Attracts investment from ethical and green workforce (stress and disillusionment can be among important interest groups such as funds. To be fair, some of these concerns are being costly), better legal compliance (fines are not employees, opinion formers and pressure • Helps to collect the information demanded addressed by the UK government’s General cheap) and so on. groups. by an increasing number of mainstream Guidelines on Environmental Reporting (see page 4), a commendably practical approach to the issue The function of reports is to communicate these • Helps recruit better people (who wants to investors (including pension funds and and an excellent place for rookies to start. benefits to a broader audience, while also helping work for a dirty, socially irresponsible insurance companies). people understand the softer but all-important company?). • Helps identify inefficiencies. If the 97 - many are service companies - are to take constituent of a business: its values. • Gives staff the credibility to engage with • Is a catalyst for generating management their first steps then something will have to be regulators and policy makers. information which can save waste and done to encourage the service industry to feel more Opposite is a list of benefits and some dos and comfortable about reporting. “Why,” asks an insurer, don’ts for the first-time reporter. The water has • Reassures corporate customers and others in reduce costs. “should we have to follow reporting standards never been warmer - it’s time for the 97 to take your supply chain (especially those with designed for a giant chemicals company?” the plunge. strong values of their own). Directions 8 Directions 9
  • 7. REPORTING IS ONE THING, COMMUNICATING EFFECTIVELY IS QUITE ANOTHER by Nigel Salter As most major organisations will testify, developing an environmental and CSR reporting process is no small task, especially for businesses approaching the issues for the first time. With all the effort put into getting a reporting It seems to me that all the effort put into generating 2. The second real drawback of the internet is the The internet has encouraged far greater quantity of process together it is perhaps somewhat harsh to the content for the reporting processes deserves better. fact that publishing a report on the web does reporting and this should be welcomed. It is not, then criticise the quality of the reports that actually absolutely nothing by way of pro-actively arguing however, improving the quality of communication are produced. But a look around at many of the Having said this, the discipline as a whole is a company’s position on these issues or bringing and this fact should not be ignored by those reports (both printed and web-based) leads me, and undoubtedly maturing and the tools for the debate to a broader audience. companies that wish to communicate with their must lead the audiences, to think that a lot of the communicating are becoming more sophisticated. audiences as opposed to simply making data effort is wasted. The fundamental problem is that it does not available. Perhaps the most influential driver of change has reach out to new audiences - an internet report If you’re going to the lengths of creating the been the internet as it has allowed far more is a depository of information for those who are This is also where we should be slightly critical of processes, gathering the data, following the information to be published and has encouraged already interested or those just passing through the drive to standardise reporting. The intention to guidelines, verifying the information and writing many organisations to begin reporting to some by chance. It is not an active, persuasive simplify and create guidelines that enable the report, surely it’s absolutely vital to ensure the degree. communication tool. comparability is obviously desirable, not least to aid messages you want to communicate do actually SRI analysis. But the danger is that an obsession get through. Unfortunately, however, the internet is not with the standards will stifle innovation and necessarily adding much to the quality of effectiveness. It could be argued that the more 5 Why is it then, that reports from many of the UK’s information being published. On the contrary, there sophisticated businesses in this field are not those major corporations are of such poor quality in terms are two very distinct problems. ‘The danger is that an with the best technical reports and processes. It of writing, communication and presentation? seems to me that the companies that are engaging 1. The first is that many companies appear to be obsession with the in this field most effectively are those who regard Many of these companies spend enormous amounts of money on their annual reports and other corporate using the internet as something of a ‘cop-out’. They feel that the easiest way to relieve some of standards will stifle the report as a means and not an end in itself. They see it as a key communications vehicle but not the communications. And yet their environment and CSR the pressure from the various groups looking for innovation and only one. The innovation and effectiveness comes publications appear not to be taken seriously enough information in this area is simply to ‘put from what they do in addition to a standard report - to merit any real care or consideration, despite the something on the website’. effectiveness.’ be it analyst presentations, online forums or staff Nigel Salter is a director fact that in many instances the very issue at stake is communications programmes. of design consultancy that of corporate reputation. The quality of this information, its relevance and salterbaxter which he founded with Penny Baxter. effectiveness and indeed the quality of the Let us not forget that the end objective is not The reports are all too frequently technically or management processes behind it do not always This is where I believe many companies have gone necessarily for all businesses to produce a standard almost academically focused (particularly the more stand up to close scrutiny. too far in adopting the internet as the main medium report on their environmental and CSR performance. environmentally based reports) and appear to have for reporting. It is practical and easy but it neglects been conceived without an assessment of audience new audiences, audiences who need to be surprised The objective is for business to address these issues and message. and also entire constituencies who either don’t have effectively and to engage with all stakeholders and access to the internet or are disinclined to use it. constituencies in a dialogue. And here I am not talking about peripheral audiences. I am talking about Chief Executives, Reporting itself is merely a signal that the dialogue Chairmen and business leaders who simply would is starting. This dialogue will only become truly not choose to go and look at a company’s website worthwhile when businesses place as much value on but who may well respond positively to an effective getting their message across as on the quality of piece of printed communication that they can carry their technical systems and data. and read on a train journey or that might grab their attention at their desk. ‘Companies appear to be using the internet as something of a ‘cop-out’… …it is not an active, persuasive communication tool.’ Directions 10 Directions 11
  • 8. ANALYSIS – OVERVIEW Methodology The data published in this document was gathered through telephone discussions with the relevant people in each company and by consulting company reports and websites. We have done our utmost to ensure that all information is confirmed by the organisation and in only three cases the companies chose not to participate and respond. Our FT-SE 200 listing is taken from the Financial Times data published on Friday 11 May 2001, ranking companies by market capitalisation. For accuracy this date has also been used as the cut-off point for data gathering. This may mean that some companies have published reports or information since that date. We have signalled this in all such cases that were brought to our attention. We have not included investment trust companies in our sample as they tend not to be regarded as ‘trading companies’ but rather they invest in the assets of other ‘trading companies’. This view is open to debate and we would welcome feedback for future editions. The places of the two companies excluded on this basis have been taken by the companies ranked 201 and 202 on the same date. CATEGORIES FOR RESEARCH KEY TO ABBREVIATIONS A full environment report ACCA The Association of Certified Chartered A full environment report is defined as a report that: Accountants • identifies the main environmental impacts of the company AR Annual Report • contains data on those impacts • • reports on actions taken in relation to the impacts identifies and discusses targets and programmes for the future. BiE Business in the Environment companies disclose no substantive environmental We are also treating a report that covers Health, Safety and Environment CSR Corporate Social Responsibility or CSR information. as a full report. DETR Department of the Environment, Transport and the Regions Section in the annual report 54 We have defined this on the basis that it needs to be a stand alone section EMS Environmental Management System and not simply a paragraph in running copy or a few lines in corporate governance or the Directors’ report. As this is the hardest area to classify companies produce stand-alone full reports. GRI Global Reporting Initiative consistently we have qualified our assessment of these sections with comments or more detailed descriptions. PERI Public Environmental Reporting Initiative Guidelines 103 SHE Safety Health and Environment We have aimed not to prompt in this area but have asked people if they are aware of the GRI or DETR guidelines if no information has been UNEP United Nations Environment Programme companies report in full or in the Annual Report. immediately offered. Independent verification statement We have taken a rigorous approach to this definition but have signalled, where possible, where other forms of audit or assurance are used. companies reported for the first time this year and 16 others 16 stated their intent to report this year for the first time. Directions 12 Directions 13
  • 9. ANALYSIS 28 companies have been reporting for 3 years and over. 19 companies have been reporting for over 5 years and British Airways have reported for 10 years. “GRI is fine as reference, but it’s impossible to apply to a multinational business with (This does not include the now transformed and/or de-merged ex-public utilities). multiple operations in multiple cultures.” 20 companies refer to the GRI guidelines. The key word here is ‘refer’. The awareness of the Global Reporting Initiative seems to be good. But referring to guidance is one thing, actually following guidelines appears to be quite another. The general comment appears to be ‘useful but too inflexible’. “ I simply don’t see the point in verifying data that has already been verified for 14 companies refer to the DETR guidelines. The Department of Environment, Transport and the Regions’ guidelines appear to have been well received but not widely enough disseminated. The two documents ISO 14001.” that companies expressed positive views about were the ‘Getting Started’ guide and the guidance on greenhouse gas emissions. (‘Helpful and easy to follow’). 30 companies have an independent verification statement. The value of independent verification appears uncertain. Companies appear to feel that it represents too great an expense for too little obvious benefit. There is no 04 companies refer to other guidelines. doubt that independent assessment adds credibility to a report but the jury is obviously still out. There is a clear trend towards including CSR issues in environment reports. This is illustrated by the diversity of titles, although the content does not always fulfil the promise on the cover. 36 companies publish full printed reports. More are expected in the next 12 months. AWG – ‘Environment and Community Report’. BAA – ‘Sustainability Report’. Billiton – ‘HSE and Communities Annual Report’. 10 companies report on the web only. This figure is surprisingly low. The web has certainly not taken over but, again, next year’s figures should prove more enlightening. Diageo – ‘Corporate Citizenship’. Railtrack – ‘Corporate Sustainability Report’. Royal and Sun Alliance – ‘Environmental, Health, Safety and Community Report’. Severn Trent – ‘Stewardship Report’. 42 companies have combined printed and web-based reports. It is encouraging to see that the majority of reporters still recognise the value of printed communication in engaging with their audiences. Shell – ‘The Shell Report. People, Planet & Profits’. United Utilities – ‘Social and Environmental Impact Report’. Directions 14 Directions 15