With new research underway, we review the business leaders and global trends of 2018 and anticipate the future of sustainability disclosures.
In 2018 Microsoft, BT Group and M&S topped the ranks of global leaders in sustainability reporting best practice. Recognition was given for outstanding performance in the following areas: Measurement & Reporting; Strategy & Governance; Target & Reduction; Engagement & Innovation.
As this year’s research gets underway, and the sustainability landscape continues to evolve, will they be able to retain their leadership positions?
The research
Published annually by international climate and sustainability consultancy, EcoAct, the report is based on research into the public disclosures of companies in four leading global indices: FTSE 100 (UK), CAC 40 (in France), IBEX 35 (Spain) and the DOW 30 (USA). The purpose is to highlight trends and recognise leadership in environmental performance across some of the world’s largest and most carbon intensive companies.
The scoring criteria, developed by consultants and experts in the field, continues to evolve each year to take account of the ongoing changes and expectations surrounding best practice reporting.
With the public spotlight on the climate and ecological crises growing in intensity, how businesses are acting and disclosing on sustainability issues matters more than ever before.
Leadership profile
What does it mean to be a global leader in sustainability disclosures? The reports identify general improvements to the levels of sustainability disclosures year on year. There are also lots of companies with impressive environmental initiatives and most large companies are now expected to publish comprehensive sustainability reports. So what sets the leaders apart?
Microsoft stole the top spot in 2018 with a score of 94%. The tech giant achieved this in part by being one of only two companies in its indices (DOW) to be carbon neutral. Beyond this, its exploration of technological solutions such as greener data centres and artificial intelligence tools for the environment and water scarcity show its impressive commitment to innovation. Its strategy has generated annual savings of 9.5MtCO2e and they also recycled over 10 million kilogrammes of consumer e-waste.
Telecommunications giant, BT, knocked M&S from the top spot of the FTSE rankings last year to take second place globally but M&S continues to demonstrate its ongoing strength in leadership in third.
BT has set and now reviewed its science-based targets (SBT, now the gold standard in emissions reductions targets) and pledged a new goal to reduce its carbon intensity 87% by 2030, as well as targeted its supply chain by setting a separate SBT to cut supply chain emissions 29% by 2030. It is also rapidly approaching its 100% worldwide renewable electricity target.
The retail giant’s Plan A 2025 remains an exemplary sustainability strategy. M&S is one of five carbon neutral companies in the FTSE 100. It reports extensively on KPIs beyond emissions and continues to make progress on its goal of zero waste by 2025.
Wider trends of 2018
2018 showed encouraging signs of improvements across the disclosures of large companies.
In 2018 70% of companies mentioned in their reports that they are contributing to the Sustainable Development Goals, showing increasing commitment by corporates to these global goals.
The rise of renewables continues as it finds its competitive foothold in the energy market. The number of companies using renewables across the IBEX35 and FTSE100 has increased from 63% to 77% in the two years since the Paris Agreement was signed.
The use of recognised reporting frameworks continues to rise in response to the demand for better and more transparent disclosures. 100% of the IBEX35, 90% of the CAC40 and 87% of the DOW30 now use recognised sustainability reporting frameworks to communicate the materiality of their external impacts. The FTSE lags with 63% but arguably it has far more companies. This figure also represents a 21% increase from the year before, which is significant in showing the speed with which proactivity is rising.
There have also been noted improvements to governance on sustainability across the board and evidence that sustainability best practices are being integrated into companies’ main strategies. The most prominent example of this is the alignment of companies to the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). In just one year since their publication, over 40 companies of the FTSE100 have committed to or are already beginning to align their environmental risk reporting to the recommendations. With similar percentages in the French and Spanish indices it is clear that the leading companies, regardless of the sector they belong to, now see the wide range of environmental initiatives as a device that not only contributes to the continuation of their operations, but also improves their reputation and financial prospects for the years to come.
However, there is still a clear and pressing need for improvement as more than 50% of FTSE businesses are still not providing evidence of risk assessment to their stakeholders. Given the increasing warnings by financial experts in the past year to better account for climate risk, we hope is that this begins to show marked improvements.
What will the future bring?
In September last year the Intergovernmental Panel on Climate Change (IPCC) published its reports into 1.5 degrees of warming and provided sobering evidence of the urgent need for more ambitious climate action and the inadequacies of the 2-degree target.
The criteria for science-based targets have been updated by the Science Based Targets initiative to align with 1.5 degrees, although this is not a requirement for validation of new targets until October this year and existing targets can remain until review is required in 2025. However, best practice target setting will now need to be more ambitious in future.
The TCFD has now been endorsed by over 500 companies globally and many of the recognised reporting frameworks have started to incorporate them into their own requirements and recommended indicators, meaning their recommendations for better climate risk assessment, better governance and more integration between sustainability and main business strategy is becoming embedded in current disclosure expectations.
Beyond this, protest movements around the globe are building momentum and demanding recognition of the global climate and ecological crises. Pressure is mounting on governments to act and corporates inevitably will be expected to respond and show proactivity.
Much of the new developments are happening after the publication of many companies’ annual sustainability disclosures this year, which will be taken into account in the research, but nevertheless we’re hoping that 2019 and beyond will bring further improvements and continue to raise the bar when it comes to corporate sustainability disclosures. Who will sit atop the leader boards, however, we will have to wait and see…
(The 2019 Sustainability Reporting Performance Reports will be released in September, you can access the full findings of the 2018 report here)
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Written by Mark Chadwick
Mark founded EcoAct UK (then Carbon Clear) after a career in the internet industry. Following the birth of hisdaughter, Mark decided to invest himself full-time into helping to leave a better world for her generation. He brings to EcoAct a passion for contributing to the climate change solution, strong business management experience, and an enthusiasm for growing successful entrepreneurial ventures. Mark has an MBA from London BusinessSchool and also won the Guardian Unltd Award for social entrepreneurship.
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