Environmental reporting is important for both businesses and governments. For businesses, it provides an essential management tool. For governments it enables progress towards environmental goals that is relatively painless in difficult economic times. The UK for example plans to make Greenhouse Gas reporting mandatory for quoted companies from 2013.
At Red Kite, our interest is firmly fixed on how to create business value from environmental issues. Here we explore in brief the potential for value creation from environmental reporting.
We are moving into an era when reporting on a company’s environmental impact will become commonplace. With growing recognition of business impacts on the environment, and the economic value of the natural environment (e.g. the TEEB initiative), statutory reporting is an attractive option for Governments as a low cost ‘nudge’ in the right direction and an essential enabler of future action – ‘you can’t manage what you can’t measure’.
In 2010, 77% of FTSE 350 companies already made some quantified report(1), sometimes through voluntary schemes such as the Carbon Disclosure Project. But, only 34% reported to government standards. And, for smaller quoted companies these figures fell to 49% and 19% respectively. Clearly, there’s a long way to go. Companies that fall behind risk higher costs to catch up with regulation, or falling behind competitors on an issue important to a growing number of customers and shareholders.
We see executives choosing – deliberately or by default – from 3 approaches to environmental reporting. These range from a ‘Responsive’ approach doing the minimum allowed, to a pro-active ‘Adding Value’ approach that uses environmental reporting as a new lens on the business, identifying opportunities to improve costs, revenues or resilience to risk. Reporting, like other environmental issues can be a powerful way to engage people across the organisation to create positive change.
(1) Environment Agency, Environmental Disclosures - third review, 2010