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DIRECTIONS SUPPLEMENT MARCH /APRIL 08
The climate change challenge
TRENDS AND ISSUES IN THE WORLD OF CORPORATE REPORTING
15
16 Why companies should look out for the pitfalls of not joining up carbon management, internal engagement and external communications.
8
9
Directions Supplement March / April 08
Welcome to the March/April edition of Directions Supplement. This issue is a special collaboration between salterbaxter and Ernst & Young. Together we take a look at the challenges of making sure climate change communication has real substance. We try to identify what should be going on inside the business and address the external and internal communications issues. We explore the steps that need to be taken internally and highlight the need for real joined up thinking on carbon management, external engagement and internal communications.
So does your business have the internal processes and systems in place to justify your rhetoric and help you avoid the traps that lie waiting for you? Lucie Harrild Head of CR Communications Salterbaxter [email protected]
There is no point in reporting your position on climate change and your activities simply to be seen to be doing the right thing. Companies need to understand the impact of climate change on their business, have clear plans to improve performance, understand progress in performance and be able to provide an accurate picture of this performance to stakeholders. Douglas Johnston Director, Corporate Responsibility Services Ernst & Young [email protected]
Ernst & Young and salterbaxter are holding a seminar in May to open the topic of this edition up for debate and discussion. If you’d like more information please do get in touch. You can email: [email protected] or call us on +44 (0)20 7229 5720
Over the past year more attention has been paid to climate change than any other corporate responsibility (CR) issue. According to a recent McKinsey survey 70% of executives view climate change as an important consideration for managing corporate reputation and brands. 50% confirm it is important to account for climate change in areas such as investment planning and supply chain management. Businesses now recognise that not addressing the issue can have a detrimental effect on a business. Step 1 in the right direction – most businesses now understand that something has to be done, they are communicating their stance externally and it appears they are incorporating it into managing their corporate reputation. Communicating externally is part of the process in tackling climate change, but there are pitfalls for a business simply stating its stance. According to the McKinsey survey, 60% of global executives view climate change as important to consider within the company’s overall strategy – but how many are really making climate change part of the overall business strategy, how they invest in the future, risk assessment and the long-term value of the business? How many are falling into the trap of disclosing externally before having internal processes and communications in place?
More businesses are translating awareness of climate change into external communications campaigns. CorporateRegister’s recent report shows almost all FT 500 sustainability reporters publish their climate change impacts, a third set out targets and only 7% assure their data. With the rise of the dreaded ‘greenwash’ term, we are certain we will see many businesses’ claims under careful examination. Disclosure must match the internal processes a business has in place. Integrating CR into a business requires the involvement and understanding of employees. Tackling climate change should be approached similarly. If employees have a clear understanding of what climate change means for the business, then businesses will be in a better position to deliver on their goals. The McKinsey survey shows few executives have taken action to tackle climate change. Over 60% of companies, where respondents consider managing environmental issues to be important, fail to define emission targets and 15% show no awareness of whether any targets are even set. Employees need to be armed with this information for the business to be able to deliver change. One of the FT 100 company representatives that we spoke with understood this and explained how they launched an employee engagement programme
Stakeholders’ tolerance thresholds are lowering dramatically all the time and climate change disclosures which are seen as simply PR will no longer meet the requirements for transparent and open communications. Developing and executing a successful strategy to address the issues arising from climate change will be dependent on having a clear grasp of the company’s exposure. This means making it a priority to take control of the ways in which information about climate change exposure is identified, gathered and reported.
If this is a key business issue – as many state in their public reporting, the quality of data needs to increase significantly before it can be used to support business decision making.
Companies are beginning to examine the carbon intensity of their activities and seeking to measure this. Whilst this is commendable, preparation of a carbon footprint rarely considers where key risks and opportunities presented by the climate agenda are likely to be; how changes to policies or consumer sentiment may impact on a company’s ability to do business; and how to maximise the benefits of projects to reduce carbon intensity.
Methodologies to estimate and report data often set out a hierarchy of measurement options which vary in complexity and accuracy. Many first time carbon baselines use a lowest common denominator approach to generate a number. The first step for any organisation has to be to examine the methods used for generating data for its most significant sources of emissions. Major emission sources are likely to be where there is greatest exposure to risks from the climate agenda and where there are likely to be the greatest opportunities for improvement. Building confidence in the data from these sources can then allow greater confidence when making decisions about investments, regulatory dialogue and risk management controls.
To date emphasis has been less on the accuracy and consistency of carbon baseline data and more on simply disclosing. Limited investment in the controls needed to provide confidence in carbon data means that the quality of this information varies from reasonable within a small handful of companies to poor.
“ Businesses stand a much better chance of delivering against their targets because employees are engaged and empowered.”
If disclosing details of climate performance and key programmes is to deliver value to business, companies need to develop much greater confidence in the clarity and integrity of their carbon data. Put bluntly, the question has to be: Why disclose something if you’re not sure you can believe in it yourself?
“Climate disclosures must be accurate and they must clearly reflect both the reasons why an organisation considers it to be important and the principal activities in place to manage performance.”
simultaneously with the external launch of their climate strategy. The main aim was to empower their most important stakeholder group – their own employees. Feedback was encouraged and it generated a 95% positive response rate. Suggestions and comments were then integrated into the strategy and objectives. Another person stated reducing resource use was imperative to the business. Raising awareness of energy efficiency amongst employees, for example, would empower them with knowledge and enhance the service to customers. Because of these communication initiatives these businesses stand a better chance of delivering against targets. Employees, as members of the public, are inundated with information. Businesses are able to help bring clarity to the current debate by improving their understanding of the impact of climate change. Following a recent Channel 4 programme, one business found from staff feedback that 5% of its employees were still questioning whether climate change was an issue. ‘Moving Consumers from Green Interest to Green Action,’ a study conducted by Insight Research Group, found consumers were willing to do more if they understood how ‘green’ actions could help the environment and benefit them personally.
This is not just a one-off exercise. Climate data will be affected by many things: changes in the business such as disposals and acquisitions; changes in the methods used for generating the data such as the emission factors and improved methods for gathering input data; changes in energy sources; and actual activities targeted at improving environmental performance. It is important that measurement systems allow for tracking changes in the business to enable isolation of the relative contribution of each of these factors to overall carbon data. Only systems which can clearly examine the relative contribution of various factors to movements in carbon data can be used to clearly demonstrate improvements in performance. It is no longer enough to present absolute data and discuss a reduction as an improvement in performance. Such movements need explanation relative to all possible factors to identify the actual improvement made. There is pressure to back up a commitment to tackling climate change with clear targets to demonstrate progress and there are certain questions that organisations should be asking themselves before disclosing on targets. Without carefully designed measurement processes allowing both aggregation at a company level and performance tracking of
Around a third of respondents to the McKinsey survey said their companies place more emphasis on climate change than any other issue. Unfortunately, it seems that many are not effectively engaging with their employees. For example, one person explained to us that internal communications on CR issues were essential to carrying through their business strategy – but they did not have anything in place for climate change. Although disclosing externally, they had not yet formalised their internal approach. So businesses need to apply a joined up approach to tackling climate change and realise the importance of employee understanding. Salterbaxter suggest internal communications should be a step ahead of any external disclosure. On the positive, we now see more of our clients appreciating the importance of avoiding the pitfall of addressing climate change through external communications alone. One of the people we spoke with had found value in the use of interactivity on their intranet. Our research also showed 6 of the 30 FT 100 people we spoke with were reluctant to discuss any internal processes or communications they may have had in place. But if you are engaging with your employees to take your strategy forward, be proud of it – it’s more than just one step forward towards meeting those carbon targets!
individual projects, it is difficult to establish meaningful targets and to monitor and report progress against them. Carbon disclosure is now a fact of life. However, it’s important that it is not simply seen as a ‘tick in box’ or PR. Climate disclosures must be accurate and they must clearly reflect both the reasons why an organisation considers it to be important and the principal activities in place to manage performance. It is important that management understand the accuracy levels and potential risks in the data and that readers understand the confidence levels in the data and can therefore view the data in an appropriate light. ‘Ball park’ green house gas data will provide readers with a sense of scale of the issue for the organisation, but are not useful in managing issues or disclosing progress. Companies should invest in measurement processes which support aggregation of company level data and also allow for tracking of performance of individual projects. These investments should give the confidence necessary to make proper decisions on a company’s approach to climate change, build meaningful targets, track progress in improvement activities and disclose programmes to external stakeholders with confidence.
“ With the rise of the dreaded ‘greenwash’ term once again, we are certain we will see many business’ claims under careful examination. Disclosure must match the internal processes a business has in place.”
“If disclosing details of climate performance and key programmes is to deliver value to business, companies need to develop much greater confidence in the clarity and integrity of their carbon data.”
How to avoid the pitfalls of disclosing on climate change? Salterbaxter and Ernst & Young provide some tips and questions your business should ask itself before communicating externally. The communication steps to take to get up the ladder… 1. A s members of the public, employees are inundated with information so businesses have a responsibility to bring clarity to the debate around climate change and help their employees understand what they can do – not only at work, but also at home. 2. I f employees have a clear understanding of what climate change means for the business they are in a better position to deliver on their goals. 3. T he return of the ‘greenwash’ criticism surrounding climate change means, to be taken seriously, disclosure must match internal processes – internally and externally. 4. There will always be sceptics but robust information and a clear commitment can only help.
…and a few questions your business should ask itself before disclosing targets. 1. D o we have enough certainty in our baseline when setting targets to know we are being realistic with what we can achieve? And should it be absolute or allow flexibility for changes in our business? 2. H ow much of the ‘low hanging fruit’ have we already realised and what investments will we need to make to achieve these targets? 3. H ow will we measure progress in our improvement projects, are our current measurement systems sufficiently detailed or will we need to make changes to these? 4. Do we have sufficient detail of existing climate programmes in place across our businesses and do we know the likely impact of these activities on our overall climate performance? 5. Are our targets ambitious enough to demonstrate a real commitment to driving down the carbon intensity of our business?
About us Contact: Lucie Harrild [email protected] Tel: +44 (0)20 7229 5720 Pavan Athwal [email protected] Tel: +44 (0)20 7229 5720 The Directions Supplements support our main Directions report and are produced every two months. The main Directions report is published each year and is now regarded as the UK’s most comprehensive analysis of the trends and issues in CR communications. If you want a copy, call us on the number below or email [email protected]
Salterbaxter advise companies on branding, corporate responsibility, corporate reporting and employee engagement. We name companies, re-invent companies, re-position companies and re-brand companies. We help companies communicate with shareholders and their employees and we advise them on how to address corporate responsibility. We create brands, complete company communications programmes and global guidelines. We design, build and manage websites, e-commerce sites and all things interactive. We develop climate change campaigns and bring sustainability to life. In short we apply creative thinking to the big issues that businesses have to address in order to improve performance.
202 Kensington Church Street London W8 4DP Tel +44 (0)20 7229 5720 Fax +44 (0)20 7229 5721 www.salterbaxter.com
This supplement is printed on Think Bright and is supplied by Howard Smith. It is an FSC (Forest Stewardship Council) certified material and is 100% recyclable. www.hspg.com Printed by CTD, an ISO 14001 certified and FSC accredited company. TT-COC-2142 ©1996 Forest Stewardship Council A.C www.ctdprinters.com
Our clients are extremely varied and include FTSE 100 and Euro 100 companies; some of the world’s most exclusive brands; independent, entrepreneurial businesses; world leading educational establishments; law firms; private equity firms and media companies.
The climate change challenge
TRENDS AND ISSUES IN THE WORLD OF CORPORATE REPORTING
15
16 Why companies should look out for the pitfalls of not joining up carbon management, internal engagement and external communications.
8
9
Directions Supplement March / April 08
Welcome to the March/April edition of Directions Supplement. This issue is a special collaboration between salterbaxter and Ernst & Young. Together we take a look at the challenges of making sure climate change communication has real substance. We try to identify what should be going on inside the business and address the external and internal communications issues. We explore the steps that need to be taken internally and highlight the need for real joined up thinking on carbon management, external engagement and internal communications.
So does your business have the internal processes and systems in place to justify your rhetoric and help you avoid the traps that lie waiting for you? Lucie Harrild Head of CR Communications Salterbaxter [email protected]
There is no point in reporting your position on climate change and your activities simply to be seen to be doing the right thing. Companies need to understand the impact of climate change on their business, have clear plans to improve performance, understand progress in performance and be able to provide an accurate picture of this performance to stakeholders. Douglas Johnston Director, Corporate Responsibility Services Ernst & Young [email protected]
Ernst & Young and salterbaxter are holding a seminar in May to open the topic of this edition up for debate and discussion. If you’d like more information please do get in touch. You can email: [email protected] or call us on +44 (0)20 7229 5720
Over the past year more attention has been paid to climate change than any other corporate responsibility (CR) issue. According to a recent McKinsey survey 70% of executives view climate change as an important consideration for managing corporate reputation and brands. 50% confirm it is important to account for climate change in areas such as investment planning and supply chain management. Businesses now recognise that not addressing the issue can have a detrimental effect on a business. Step 1 in the right direction – most businesses now understand that something has to be done, they are communicating their stance externally and it appears they are incorporating it into managing their corporate reputation. Communicating externally is part of the process in tackling climate change, but there are pitfalls for a business simply stating its stance. According to the McKinsey survey, 60% of global executives view climate change as important to consider within the company’s overall strategy – but how many are really making climate change part of the overall business strategy, how they invest in the future, risk assessment and the long-term value of the business? How many are falling into the trap of disclosing externally before having internal processes and communications in place?
More businesses are translating awareness of climate change into external communications campaigns. CorporateRegister’s recent report shows almost all FT 500 sustainability reporters publish their climate change impacts, a third set out targets and only 7% assure their data. With the rise of the dreaded ‘greenwash’ term, we are certain we will see many businesses’ claims under careful examination. Disclosure must match the internal processes a business has in place. Integrating CR into a business requires the involvement and understanding of employees. Tackling climate change should be approached similarly. If employees have a clear understanding of what climate change means for the business, then businesses will be in a better position to deliver on their goals. The McKinsey survey shows few executives have taken action to tackle climate change. Over 60% of companies, where respondents consider managing environmental issues to be important, fail to define emission targets and 15% show no awareness of whether any targets are even set. Employees need to be armed with this information for the business to be able to deliver change. One of the FT 100 company representatives that we spoke with understood this and explained how they launched an employee engagement programme
Stakeholders’ tolerance thresholds are lowering dramatically all the time and climate change disclosures which are seen as simply PR will no longer meet the requirements for transparent and open communications. Developing and executing a successful strategy to address the issues arising from climate change will be dependent on having a clear grasp of the company’s exposure. This means making it a priority to take control of the ways in which information about climate change exposure is identified, gathered and reported.
If this is a key business issue – as many state in their public reporting, the quality of data needs to increase significantly before it can be used to support business decision making.
Companies are beginning to examine the carbon intensity of their activities and seeking to measure this. Whilst this is commendable, preparation of a carbon footprint rarely considers where key risks and opportunities presented by the climate agenda are likely to be; how changes to policies or consumer sentiment may impact on a company’s ability to do business; and how to maximise the benefits of projects to reduce carbon intensity.
Methodologies to estimate and report data often set out a hierarchy of measurement options which vary in complexity and accuracy. Many first time carbon baselines use a lowest common denominator approach to generate a number. The first step for any organisation has to be to examine the methods used for generating data for its most significant sources of emissions. Major emission sources are likely to be where there is greatest exposure to risks from the climate agenda and where there are likely to be the greatest opportunities for improvement. Building confidence in the data from these sources can then allow greater confidence when making decisions about investments, regulatory dialogue and risk management controls.
To date emphasis has been less on the accuracy and consistency of carbon baseline data and more on simply disclosing. Limited investment in the controls needed to provide confidence in carbon data means that the quality of this information varies from reasonable within a small handful of companies to poor.
“ Businesses stand a much better chance of delivering against their targets because employees are engaged and empowered.”
If disclosing details of climate performance and key programmes is to deliver value to business, companies need to develop much greater confidence in the clarity and integrity of their carbon data. Put bluntly, the question has to be: Why disclose something if you’re not sure you can believe in it yourself?
“Climate disclosures must be accurate and they must clearly reflect both the reasons why an organisation considers it to be important and the principal activities in place to manage performance.”
simultaneously with the external launch of their climate strategy. The main aim was to empower their most important stakeholder group – their own employees. Feedback was encouraged and it generated a 95% positive response rate. Suggestions and comments were then integrated into the strategy and objectives. Another person stated reducing resource use was imperative to the business. Raising awareness of energy efficiency amongst employees, for example, would empower them with knowledge and enhance the service to customers. Because of these communication initiatives these businesses stand a better chance of delivering against targets. Employees, as members of the public, are inundated with information. Businesses are able to help bring clarity to the current debate by improving their understanding of the impact of climate change. Following a recent Channel 4 programme, one business found from staff feedback that 5% of its employees were still questioning whether climate change was an issue. ‘Moving Consumers from Green Interest to Green Action,’ a study conducted by Insight Research Group, found consumers were willing to do more if they understood how ‘green’ actions could help the environment and benefit them personally.
This is not just a one-off exercise. Climate data will be affected by many things: changes in the business such as disposals and acquisitions; changes in the methods used for generating the data such as the emission factors and improved methods for gathering input data; changes in energy sources; and actual activities targeted at improving environmental performance. It is important that measurement systems allow for tracking changes in the business to enable isolation of the relative contribution of each of these factors to overall carbon data. Only systems which can clearly examine the relative contribution of various factors to movements in carbon data can be used to clearly demonstrate improvements in performance. It is no longer enough to present absolute data and discuss a reduction as an improvement in performance. Such movements need explanation relative to all possible factors to identify the actual improvement made. There is pressure to back up a commitment to tackling climate change with clear targets to demonstrate progress and there are certain questions that organisations should be asking themselves before disclosing on targets. Without carefully designed measurement processes allowing both aggregation at a company level and performance tracking of
Around a third of respondents to the McKinsey survey said their companies place more emphasis on climate change than any other issue. Unfortunately, it seems that many are not effectively engaging with their employees. For example, one person explained to us that internal communications on CR issues were essential to carrying through their business strategy – but they did not have anything in place for climate change. Although disclosing externally, they had not yet formalised their internal approach. So businesses need to apply a joined up approach to tackling climate change and realise the importance of employee understanding. Salterbaxter suggest internal communications should be a step ahead of any external disclosure. On the positive, we now see more of our clients appreciating the importance of avoiding the pitfall of addressing climate change through external communications alone. One of the people we spoke with had found value in the use of interactivity on their intranet. Our research also showed 6 of the 30 FT 100 people we spoke with were reluctant to discuss any internal processes or communications they may have had in place. But if you are engaging with your employees to take your strategy forward, be proud of it – it’s more than just one step forward towards meeting those carbon targets!
individual projects, it is difficult to establish meaningful targets and to monitor and report progress against them. Carbon disclosure is now a fact of life. However, it’s important that it is not simply seen as a ‘tick in box’ or PR. Climate disclosures must be accurate and they must clearly reflect both the reasons why an organisation considers it to be important and the principal activities in place to manage performance. It is important that management understand the accuracy levels and potential risks in the data and that readers understand the confidence levels in the data and can therefore view the data in an appropriate light. ‘Ball park’ green house gas data will provide readers with a sense of scale of the issue for the organisation, but are not useful in managing issues or disclosing progress. Companies should invest in measurement processes which support aggregation of company level data and also allow for tracking of performance of individual projects. These investments should give the confidence necessary to make proper decisions on a company’s approach to climate change, build meaningful targets, track progress in improvement activities and disclose programmes to external stakeholders with confidence.
“ With the rise of the dreaded ‘greenwash’ term once again, we are certain we will see many business’ claims under careful examination. Disclosure must match the internal processes a business has in place.”
“If disclosing details of climate performance and key programmes is to deliver value to business, companies need to develop much greater confidence in the clarity and integrity of their carbon data.”
How to avoid the pitfalls of disclosing on climate change? Salterbaxter and Ernst & Young provide some tips and questions your business should ask itself before communicating externally. The communication steps to take to get up the ladder… 1. A s members of the public, employees are inundated with information so businesses have a responsibility to bring clarity to the debate around climate change and help their employees understand what they can do – not only at work, but also at home. 2. I f employees have a clear understanding of what climate change means for the business they are in a better position to deliver on their goals. 3. T he return of the ‘greenwash’ criticism surrounding climate change means, to be taken seriously, disclosure must match internal processes – internally and externally. 4. There will always be sceptics but robust information and a clear commitment can only help.
…and a few questions your business should ask itself before disclosing targets. 1. D o we have enough certainty in our baseline when setting targets to know we are being realistic with what we can achieve? And should it be absolute or allow flexibility for changes in our business? 2. H ow much of the ‘low hanging fruit’ have we already realised and what investments will we need to make to achieve these targets? 3. H ow will we measure progress in our improvement projects, are our current measurement systems sufficiently detailed or will we need to make changes to these? 4. Do we have sufficient detail of existing climate programmes in place across our businesses and do we know the likely impact of these activities on our overall climate performance? 5. Are our targets ambitious enough to demonstrate a real commitment to driving down the carbon intensity of our business?
About us Contact: Lucie Harrild [email protected] Tel: +44 (0)20 7229 5720 Pavan Athwal [email protected] Tel: +44 (0)20 7229 5720 The Directions Supplements support our main Directions report and are produced every two months. The main Directions report is published each year and is now regarded as the UK’s most comprehensive analysis of the trends and issues in CR communications. If you want a copy, call us on the number below or email [email protected]
Salterbaxter advise companies on branding, corporate responsibility, corporate reporting and employee engagement. We name companies, re-invent companies, re-position companies and re-brand companies. We help companies communicate with shareholders and their employees and we advise them on how to address corporate responsibility. We create brands, complete company communications programmes and global guidelines. We design, build and manage websites, e-commerce sites and all things interactive. We develop climate change campaigns and bring sustainability to life. In short we apply creative thinking to the big issues that businesses have to address in order to improve performance.
202 Kensington Church Street London W8 4DP Tel +44 (0)20 7229 5720 Fax +44 (0)20 7229 5721 www.salterbaxter.com
This supplement is printed on Think Bright and is supplied by Howard Smith. It is an FSC (Forest Stewardship Council) certified material and is 100% recyclable. www.hspg.com Printed by CTD, an ISO 14001 certified and FSC accredited company. TT-COC-2142 ©1996 Forest Stewardship Council A.C www.ctdprinters.com
Our clients are extremely varied and include FTSE 100 and Euro 100 companies; some of the world’s most exclusive brands; independent, entrepreneurial businesses; world leading educational establishments; law firms; private equity firms and media companies.
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