Environmental disclosure in the FTSE All Share

Source: ACCA, 24 September 2004

Less than a quarter of FTSE All Share companies make any quantitative environmental disclosures in their annual reports and accounts, despite new DTI regulation calling for this from January 2005.
The Environment Agency has revealed results of the first study of environmental disclosure within the annual reports and accounts of FTSE All Share companies. The basic findings of the report indicate that the vast majority (89%) of companies discuss some aspect of their interactions with the environment. However, closer examination of these disclosures revealed that the majority lack depth, rigour and quantification and few could be described as comprehensive, or adequate for shareholders to properly assess environmental risks or opportunities.

Only 10% of the FTSE All Share (55 companies) use annual reports and Accounts to report on waste, water and energy/climate change, and even less provide quantitative information.

Quantitative environmental disclosures (excluding provisions and contingent liabilities) are made by 24% of companies in the FTSE All Share. Where made, they are seldom related to possible financial consequences (11% of FTSE 350) or linked to future changes in shareholder value (5% of FTSE 350).

The Environment Agency commissioned Trucost to study the current extent and nature of environmental disclosure of FTSE All Share companies in order to establish a baseline prior to the introduction of mandatory OFR reporting requirements in 2005. This study, which used a comprehensive, standard methodology, provides a valuable benchmark of corporate environmental disclosure for industry that will allow assessment of future progress towards greater corporate transparency in this area. The Environment Agency intends to repeat this study in 2006.

UK Environment Agency