Mark Hynes - thoughts on corporate disclosure

Opinions on changing rules, changing best practices, and their effect on investor relations officers.

Tuesday, January 31, 2006

Companies confused on their green (reporting) responsibilities

UK companies are thoroughly confused on the environmental responsibilities generally, and within that, their corporate reporting obligations.

Two news items this week have focussed on the ‘green’ element of an IRO’s task.

Firstly, the IOD has released a survey which highlighted uncertainty over the Government’s introduction of new environmental legislation in the UK in recent years. This has meant that some new rules have gone largely unacknowledged by the business community. Miles Templeman, Director General of the IoD, introducing the research conducted among medium and smaller companies, said:

“The Government have a tendency to leave it too late when advising business on what is required of new environmental rules coming from Brussels. Recent examples have included the twice-delayed Waste Electrical and Electronic Equipment Directive and the uncertainty about the Energy Performance of Buildings Directive.”

A further example is highlighted in the second news item this week, in the release of Defra’s Environmental Reporting Guidelines. These involve the publication in a company's Annual Report and/or self-standing reports of general environmental policy statements, usually including details of environmental performance such as greenhouse gas emissions, waste, water use and other relevant impacts giving quantified data and improvement targets.

The guidelines published by Defra will help companies measure, manage and report their environmental impacts. They outline how businesses can use Key Performance Indicators (KPIs) to manage and report their environmental performance. They also set out which environmental impacts (i.e. which KPIs) are most significant for which business sectors.

The challenge comes in where this fits with the ending of the OFR. According to the FT, Elliot Morley, environment minister, said that many companies thought that without the OFR they had no obligation to report on their green impact. "(This is) simply not the case," he said. "All quoted and large private companies preparing the new business review will need to report significant environmental issues."

Mr Morley's comments underline a growing realisation among companies that the scrapping of the OFR is creating as many complications as it has removed. Many executives are struggling to understand their reporting obligations. Defra’s (voluntary) guidelines are a further part of the mosaic that issuers will wish to bear in mind.

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