A review of climate change disclosures in listed companies
This article details the findings following a review of climate change disclosures in a sample of FTSE 100 companies
A review was carried out, in 2020, of the climate-related disclosures in a sample of 2018 and 2019 annual reports of FTSE 100 companies.
Summary of the main findings from the review
- It is clear from the review that this is an evolving field and the extent and quality of the disclosure given varies greatly, from very clear and informative to those where more information would have been helpful.
- All companies sampled gave a table which summarised their greenhouse gas (GHG) emissions with a comparison given at least against the prior year. Some companies gave a four- to five-year comparison or the current year comparison as against their base year.
- A third of the sampled annual reports made no mention of the Task Force on Climate-related Financial Disclosures (TCFD) and its recommendations. We expect that this will change as disclosure requirements increase.
- Only one quarter of the sampled annual reports described a climate change measures as one of their standard KPIs.
- Two companies referred to the performance of scenario analysis on the likely financial impact of climate change upon their organisation.
Most of the organisations we sampled engaged an independent party (often a Big 4 audit firm) to give limited assurance on the climate change disclosures. They reported under the International Standard on Assurance Engagements (ISAE) 3000 (Revised), Assurance Engagements other than Audits and Reviews of Historical Financial Information, and, in respect of the greenhouse gas emissions, in accordance with International Standard on Assurance Engagements (ISAE) 3410 Assurance engagements on greenhouse gas statements, issued by the International Auditing and Assurance Standards Board (IAASB).
Summary of findings by sector
Mining sector
Climate change is disclosed as a risk in the annual report.
KPIs reported related to climate change:
- Energy consumption (in million gigajoules)
- Greenhouse gas emissions
- Total water withdrawals
Additional information disclosed:
- Disclosure of the TCFD four core elements with their recommended disclosures and the page in the annual report where each disclosure may be found.
- Information on targets and performance against target and previous year for energy and carbon emissions targets.
- Inclusion of the group’s environmental KPIs for the current year, the previous three years along with an explanation of their basis of calculation.
Food and drink sector
Climate change is disclosed as a risk in the annual report.
KPIs reported related to climate change:
- Water efficiency
- Carbon emissions
Additional information disclosed:
- Disclosures on climate risk and the adoption of TCFD recommendations.
- Information about the organisation’s climate change KPIs giving, for each one, its definition, its target for 2020, current year and cumulative performance against target, progress to date.
- Figures summarising the carbon emissions and other environmental data for current year, the two preceding years and the base year. This data is given in total and by region.
Education sector
KPIs reported related to Climate change:
- Global greenhouse gas emissions
Disclosures relating to CO2 emissions:
- Paper purchasing policy
Retail sector
Climate change is disclosed as a risk in the annual report.
- Disclosures relating to CO2 emissions:
- Energy consumption in gigawatt hours
- Water abstracted
- Water disposed
- Quantity of packaging used
- Reducing use of plastic
- Reducing, reusing and recycling plastic
- Reducing food waste
- Waste disposal
- Reducing food waste
- Hard to recycle packaging removed from own brand goods
Additional information disclosed:
- A statement that it has publicly committed to carrying out the recommendations of the TCFD on climate change disclosure on governance; strategy; risk management; metrics and targets.
- There is clear disclosure on efforts made to reduce food waste.
- The inclusion of easy to follow bar charts depicting carbon emissions, energy and water usage for the current year and the preceding four years.
- Reference the group’s environmental compliance and the relatively small total of fines levied on it for breaches of environmental legislation.
Pharmaceutical sector
Disclosures relating to CO2 emissions:
- Energy consumption in Mwhours
- Waste production
- Water used
Distribution sector
Climate change is disclosed as a risk in the annual report.
Disclosures relating to CO2 emissions:
- Energy consumption in the UK for natural gas (cubic metres); fuel (litres); electricity (kilowatt hours).
Additional information disclosed:
- Disclosure of KPIs for carbon emissions (Scope 1 and 2 shown separately) expressed in tonnes of CO2e per £m of revenue for current year and previous four years depicted on bar charts. It also has a KPI for fuel usage of diesel, petrol and LPG used in the group’s own vehicles expressed as litres per £’000 of revenue in bar charts similar to the carbon emissions.
- The inclusion of a table which sets out the carbon emissions KPIs for current year and previous two years and compares what the targets were for their reduction by 2019, what has been achieved towards that reduction in 2019 and the target for reduction in 2020.
Banking sector
Climate change is disclosed as a risk in the annual report.
Additional information disclosed:
- Inclusion of a section entitled “Supporting Sustainable Growth” with five sustainable finance commitments which were made in 2017 and the progress to date. These include adopting the recommendations of the TCFD; sourcing 100% of the group’s electricity from renewable sources by 2030, with an interim target of 90% by 2025; provide and facilitate $100bn of sustainable financing and investment by 2025.
Manufacturing sector
Additional information disclosed:
- A description of how the group addresses the major risks and opportunities of climate change on its business. It uses the TCFD four core elements to give examples of how it does this.