Sustainability reporting of the FTSE 100 – What’s new for 2016?
The announcement today that the UK is likely to ratify the Paris climate deal this year means that we need to think about how those targets become national policies, and the role that businesses must take in reducing carbon emissions and managing their environmental impacts.
With that in mind, we are excited to be launching our 2016 Sustainability Reporting Performance of the FTSE 100 research on 29th September.
As ever, we have adjusted the scoring criteria to reflect what we consider to be best practice for 2016. Below is a summary of the five main changes to the scoring criteria, and why we think they’re important. As the aim of the report is to highlight best practice in sustainability reporting, we’ve also whittled out a few more “easy win” points for activities that we believe all companies should be carrying out or that are required by law.
1. Sustainability beyond emissions reporting
We’ve renamed our research this year to ‘Sustainability Reporting Performance of the FTSE 100′, to reflect the expansion of the criteria this year to include environmental sustainability issues. The research is no longer limited to carbon because it’s clear that a holistic approach to environmental sustainability is required in order for a business to survive and thrive in a resource constrained world. Measurement and reporting of carbon emissions is still a vital indicator of environmental performance, yet this alone is not enough. Aside from the most basic compliance, there is limited value derived from effectively measuring your emissions if you aren’t then going to use them to form the basis of a more comprehensive plan. Indeed, we advocate that the considerations of climate change as a key risk to business means that sustainability should be built into corporate strategy.
Another significant change to the scoring criteria this year is the inclusion of a new section: Innovation. As resource scarcity and reliability of energy access become more pressing issues, there is an increased call for innovative and holistic approaches to sustainability.
The innovation section recognises companies who are going above and beyond what is already considered best practice. Areas of assessment in this section include natural capital accounting, the circular economy, management of water use and co-innovation with suppliers. A high scoring company will relish the challenge of deconstructing complex theories such as the circular economy or natural capital accounting, and are beginning to adopt them into their business strategies.
3. Scope 3
The criteria surrounding Scope 3 calculations is more stringent in the research this year. For the highest score in this section, a company must have performed a materiality assessment of their Scope 3 footprint; they must demonstrate that there is a clear rationale behind the categories calculated, rather than choosing the categories which are easiest or the most convenient to calculate. This is particularly important this year, as the uptake of science-based targets continues, and Scope 3 emission targets form a key part of the Science Based Target Initiative.
4. Mitigation and Adaptation
For the sake of the planet (and implicitly all businesses) it is crucial that we work to mitigate the effects of climate change. Not enough is being done by companies to mitigate climate change, and no matter how hard businesses work to reduce their environmental impact, climate change isn’t going away. It will have an impact on all businesses, and therefore to ensure future sustainability it’s important to form a climate adaptation plan. An adaptation plan will assess the climate risk, and work to adapt the business strategy and processes such that the negative impacts of climate change are reduced.
Finally, this year we have tightened the criteria surrounding renewable energy, to reflect the Greenhouse Gas Protocol’s “good quality criteria”. This ensures that companies reporting on renewable energy are doing so in a robust and transparent way.