The Climate Change Challenge - Why companies should look out for the pitfalls of not joining up carbon management, internal engagement and external communications

1. DIRECTIONS
SUPPLEMENT The climate
MARCH /APRIL 08 change challenge
TRENDS AND ISSUES IN THE WORLD
OF CORPORATE REPORTING
15 16
Why companies should
look out for the pitfalls
of not joining up carbon
management, internal
engagement and external
communications.
8 9

2. Directions Supplement
March / April 08
Welcome to the March/April edition of Directions Supplement.
This issue is a special collaboration between salterbaxter and
Ernst & Young. Together we take a look at the challenges of making
sure climate change communication has real substance. We try to
identify what should be going on inside the business and address
the external and internal communications issues. We explore the
steps that need to be taken internally and highlight the need for
real joined up thinking on carbon management, external engagement
and internal communications.
So does your business have the internal processes
and systems in place to justify your rhetoric and
help you avoid the traps that lie waiting for you?
Lucie Harrild
Head of CR Communications
Salterbaxter
lharrild@salterbaxter.com
There is no point in reporting your position on climate
change and your activities simply to be seen to be
doing the right thing. Companies need to understand
the impact of climate change on their business, have
clear plans to improve performance, understand
progress in performance and be able to provide an
accurate picture of this performance to stakeholders.
Douglas Johnston
Director, Corporate Responsibility Services
Ernst & Young
djohnston2@UK.EY.COM
Ernst & Young and salterbaxter
are holding a seminar in May to
open the topic of this edition up
for debate and discussion.
If you’d like more information
please do get in touch. You can
email: directions@salterbaxter.com
or call us on +44 (0)20 7229 5720

3. Over the past year more attention has been More businesses are translating awareness of
paid to climate change than any other corporate climate change into external communications
responsibility (CR) issue. According to a recent campaigns. CorporateRegister’s recent report
McKinsey survey 70% of executives view shows almost all FT 500 sustainability reporters
climate change as an important consideration publish their climate change impacts, a third set
for managing corporate reputation and brands. out targets and only 7% assure their data. With
50% confirm it is important to account for the rise of the dreaded ‘greenwash’ term, we
climate change in areas such as investment are certain we will see many businesses’ claims “ Businesses stand
planning and supply chain management. under careful examination. Disclosure must
Businesses now recognise that not addressing match the internal processes a business a much better
the issue can have a detrimental effect on has in place. Integrating CR into a business chance of
a business. requires the involvement and understanding
of employees. Tackling climate change should
delivering
Step 1 in the right direction – most businesses be approached similarly. against their
now understand that something has to be done,
they are communicating their stance externally If employees have a clear understanding of targets because
and it appears they are incorporating it into what climate change means for the business, employees are
managing their corporate reputation. then businesses will be in a better position to
deliver on their goals. The McKinsey survey engaged and
Communicating externally is part of the process shows few executives have taken action to
in tackling climate change, but there are empowered.”
tackle climate change. Over 60% of companies,
pitfalls for a business simply stating its stance. where respondents consider managing
According to the McKinsey survey, 60% of environmental issues to be important, fail to
global executives view climate change as define emission targets and 15% show no
important to consider within the company’s awareness of whether any targets are even set.
overall strategy – but how many are really
making climate change part of the overall Employees need to be armed with this
business strategy, how they invest in the future, information for the business to be able to
risk assessment and the long-term value of the deliver change. One of the FT 100 company
business? How many are falling into the trap representatives that we spoke with understood
of disclosing externally before having internal this and explained how they launched an
processes and communications in place? employee engagement programme
Stakeholders’ tolerance thresholds are lowering If this is a key business issue – as many state in
dramatically all the time and climate change their public reporting, the quality of data needs
disclosures which are seen as simply PR will no to increase significantly before it can be used
longer meet the requirements for transparent to support business decision making.
and open communications. Developing and
executing a successful strategy to address If disclosing details of climate performance and “Climate disclosures
key programmes is to deliver value to business,
the issues arising from climate change will be
companies need to develop much greater must be accurate
dependent on having a clear grasp of the
company’s exposure. This means making it a confidence in the clarity and integrity of their and they must
carbon data. Put bluntly, the question has to be:
priority to take control of the ways in which clearly reflect both
information about climate change exposure Why disclose something if you’re not
is identified, gathered and reported. sure you can believe in it yourself?
the reasons why
Companies are beginning to examine the
an organisation
Methodologies to estimate and report data
carbon intensity of their activities and seeking often set out a hierarchy of measurement considers it to be
to measure this. Whilst this is commendable, options which vary in complexity and accuracy. important and the
preparation of a carbon footprint rarely Many first time carbon baselines use a lowest
considers where key risks and opportunities common denominator approach to generate principal activities
presented by the climate agenda are likely a number. The first step for any organisation in place to manage
to be; how changes to policies or consumer has to be to examine the methods used for
sentiment may impact on a company’s ability generating data for its most significant sources
performance.”
to do business; and how to maximise the of emissions. Major emission sources are likely
benefits of projects to reduce carbon intensity. to be where there is greatest exposure to risks
To date emphasis has been less on the from the climate agenda and where there are
accuracy and consistency of carbon baseline likely to be the greatest opportunities for
data and more on simply disclosing. Limited improvement. Building confidence in the data
investment in the controls needed to provide from these sources can then allow greater
confidence in carbon data means that confidence when making decisions about
the quality of this information varies from investments, regulatory dialogue and risk
reasonable within a small handful of management controls.
companies to poor.

4. simultaneously with the external launch of Around a third of respondents to the McKinsey “ With the rise of the
their climate strategy. The main aim was to survey said their companies place more
empower their most important stakeholder emphasis on climate change than any other dreaded ‘greenwash’
group – their own employees. Feedback was issue. Unfortunately, it seems that many are term once again,
encouraged and it generated a 95% positive not effectively engaging with their employees.
response rate. Suggestions and comments For example, one person explained to us that we are certain we
were then integrated into the strategy and internal communications on CR issues were will see many
objectives. Another person stated reducing essential to carrying through their business
resource use was imperative to the business. strategy – but they did not have anything in business’ claims
Raising awareness of energy efficiency place for climate change. Although disclosing under careful
amongst employees, for example, would externally, they had not yet formalised their
internal approach. So businesses need to
examination.
empower them with knowledge and enhance
the service to customers. Because of these apply a joined up approach to tackling climate Disclosure must
change and realise the importance of
communication initiatives these businesses
employee understanding.
match the internal
stand a better chance of delivering
against targets. processes a business
Salterbaxter suggest internal communications
Employees, as members of the public, are should be a step ahead of any external has in place.”
inundated with information. Businesses are disclosure. On the positive, we now see more
able to help bring clarity to the current debate of our clients appreciating the importance
by improving their understanding of the impact of avoiding the pitfall of addressing climate
of climate change. Following a recent Channel 4 change through external communications
programme, one business found from staff alone. One of the people we spoke with had
feedback that 5% of its employees were still found value in the use of interactivity on their
questioning whether climate change was an intranet. Our research also showed 6 of the 30
issue. ‘Moving Consumers from Green Interest FT 100 people we spoke with were reluctant to
to Green Action,’ a study conducted by Insight discuss any internal processes or communications
Research Group, found consumers were willing they may have had in place. But if you are
to do more if they understood how ‘green’ engaging with your employees to take your
actions could help the environment and benefit strategy forward, be proud of it – it’s more than
them personally. just one step forward towards meeting those
carbon targets!
This is not just a one-off exercise. Climate individual projects, it is difficult to establish “If disclosing
data will be affected by many things: changes in meaningful targets and to monitor and report
the business such as disposals and acquisitions; progress against them. details of climate
changes in the methods used for generating the
Carbon disclosure is now a fact of life. However,
performance and
data such as the emission factors and improved
methods for gathering input data; changes in it’s important that it is not simply seen as a key programmes
energy sources; and actual activities targeted ‘tick in box’ or PR. Climate disclosures must is to deliver value
at improving environmental performance. be accurate and they must clearly reflect both
the reasons why an organisation considers it to business,
It is important that measurement systems to be important and the principal activities in companies need
allow for tracking changes in the business to place to manage performance. It is important
enable isolation of the relative contribution of that management understand the accuracy to develop much
each of these factors to overall carbon data. levels and potential risks in the data and that greater confidence
readers understand the confidence levels in
Only systems which can clearly examine the the data and can therefore view the data in in the clarity and
relative contribution of various factors to
movements in carbon data can be used to
an appropriate light. ‘Ball park’ green house integrity of their
gas data will provide readers with a sense
clearly demonstrate improvements in of scale of the issue for the organisation,
carbon data.”
performance. It is no longer enough to present but are not useful in managing issues or
absolute data and discuss a reduction as an disclosing progress. Companies should invest
improvement in performance. Such movements in measurement processes which support
need explanation relative to all possible factors aggregation of company level data and
to identify the actual improvement made. also allow for tracking of performance of
There is pressure to back up a commitment individual projects.
to tackling climate change with clear targets These investments should give the confidence
to demonstrate progress and there are certain necessary to make proper decisions on a
questions that organisations should be asking company’s approach to climate change,
themselves before disclosing on targets. build meaningful targets, track progress in
Without carefully designed measurement improvement activities and disclose programmes
processes allowing both aggregation at a to external stakeholders with confidence.
company level and performance tracking of

5. How to avoid the pitfalls of disclosing on
climate change? Salterbaxter and Ernst
& Young provide some tips and questions
your business should ask itself before
communicating externally.
The communication steps to take to get up the ladder…
1. As members of the public, employees are inundated with information
so businesses have a responsibility to bring clarity to the debate around
climate change and help their employees understand what they can
do – not only at work, but also at home.
2. If employees have a clear understanding of what climate change means
for the business they are in a better position to deliver on their goals.
3. The return of the ‘greenwash’ criticism surrounding climate change
means, to be taken seriously, disclosure must match internal processes
– internally and externally.
4. There will always be sceptics but robust information and a clear
commitment can only help.
…and a few questions your business should
ask itself before disclosing targets.
1. Do we have enough certainty in our baseline when setting
targets to know we are being realistic with what we can achieve?
And should it be absolute or allow flexibility for changes in
our business?
2. How much of the ‘low hanging fruit’ have we already realised and
what investments will we need to make to achieve these targets?
3. How will we measure progress in our improvement projects,
are our current measurement systems sufficiently detailed or
will we need to make changes to these?
4. Do we have sufficient detail of existing climate programmes in
place across our businesses and do we know the likely impact
of these activities on our overall climate performance?
5. Are our targets ambitious enough to demonstrate a real
commitment to driving down the carbon intensity of
our business?

6. About us
Contact:
Lucie Harrild
Salterbaxter advise companies
lharrild@salterbaxter.com
Tel: +44 (0)20 7229 5720
on branding, corporate
Pavan Athwal responsibility, corporate reporting
pathwal@salterbaxter.com
Tel: +44 (0)20 7229 5720 and employee engagement.
The Directions Supplements
support our main Directions
We name companies, re-invent companies,
report and are produced re-position companies and re-brand companies.
every two months. The
main Directions report is We help companies communicate with
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now regarded as the UK’s
shareholders and their employees and we advise
most comprehensive analysis them on how to address corporate responsibility.
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want a copy, call us on the
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websites, e-commerce sites and all things
interactive. We develop climate change
campaigns and bring sustainability to life.
In short we apply creative thinking to the big
issues that businesses have to address in order
to improve performance.
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