Reflecting upon the 2017 CDP results and preparing for the 2018 changes

We are excited to head into the new year with new developments and improvements in the CDP scoring. The much anticipated 2018 CDP questionnaires have been released and designed in a manner which makes the questionnaires more relevant to different industries and sectors and streamlines the whole reporting process for the businesses. Apart from the CDP’s reporting portal that now enjoys a fresh new look and a redesigned interface, what key changes do the 2018 questionnaires hold for their respondents?

  1. Harmonisation across the reporting landscape
  • The CPD has continued to align the questionnaires with other reporting frameworks such as DJSi, SASB and GRI, to effectively reduce the level of effort required to report across multiple frameworks – it seems you can have too much of a good thing!
  • Many of the changes made to this year’s CDP also incorporate the recommendations put forward by the Task Force on Climate-related Financial Disclosures, with a strong focus on risks.
  1. Simplifying the reporting process
  • A tiered system approach to reporting has been introduced, whereby the first-time respondents and SMEs can choose to answer the minimum questionnaire (non-sector specific), which as you would expect, contains fewer questionnaires than the full version.
  • In each questionnaire, the improved tagging of questions will support SMEs in reporting only those aspects that are pertinent to the SME‘s operations.
  1. Sector specific questionnaires
  • Respondents falling under “high impact sector activities“ category must now answer sector-specific questionnaires grouped under: Climate change, water and forests (reflecting the CDP’s programmes).
  • Companies need to select their core industries based on revenue and will only be required to answer those questions deemed relevant for their chosen industries.
  • Companies outside of Agriculture, Energy, Materials and Transport, will respond to the general questionnaire as it was required in the previous year.
  1. Climate change questionnaire
  • With the 2017 update on Science Based Targets (SBTs) questions and the inclusion of an unscored question on the Paris Agreement, the 2018 questionnaire goes one step further.The new questionnaire requires details on scenario analysis and stress tests to assess whether companies are on a 2-degree trajectory. This will be new for many companies and should be paid close attention in the run-up to the 2018 deadline.
  • For businesses that have GHG emissions other than CO2 and typically report in tonnes CO2-equivalent, a breakdown of global scope 1 emissions by each of the 6 Kyoto greenhouse gases is requested. Companies will need to begin calculating this and incorporating it into their carbon reporting now.
  • The 2018 questionnaire also provides companies with the opportunity to report on additional “forward-looking metrics“ that may directly or indirectly impact their carbon emissions, such as land use and waste.
  1. Supply chain
  • This year’s CDP has strengthened its focus on supply chains and respondents have the option to include “additional supply chain” questions within each questionnaire.
  • The questions provide companies with the opportunity to allocate emissions to customers, include life-cycle data for their products and also disclose information on“mutually-beneficial climate-related projects“.

We also have a good reason to celebrate as many of our clients received their 2016 scores end of last year and we are delighted to share their success stories.

One of our clients within the legal sector moved up its CDP score from a ‘B’ to an almighty  ‘A-’. A CDP spokesperson announced our client’s firm as ‘the second highest scoring professional services supply chain respondent’. Alongside, one of our key clients, SThree plc has successfully maintained a ‘B’ score by integrating an effective sustainability agenda across its business which clearly demonstrates SThree’s continued commitment to sustainability.

The CDP’s reporting framework is constantly evolving, making it harder for businesses to hit those top scores. Companies are encouraged to increase the level of the disclosure year on year and greater emphasis is placed on areas including strategy, risks and targets in 2018.

We look forward to working with all our clients to respond to this year’s CDP. With the visibility of the implemented changes, we suggest that businesses start to think about their responses to the new questionnaires and plan for the upcoming reporting exercise. Carbon Smart is offering early support to help clients navigate through these changes – we conduct a gap analysis against the scoring methodologies to spot opportunities for improving performance and scoring those points which are harder to reach.

Could the EU NFRD have prevented the BBC pay scandal?

In July 2017, the BBC made headline news when the sheer scale of their gender pay gap was revealed. The revelation that the top 7 earners were men, and that only a third of the top 96 earners were women, shocked many and came in for fierce criticism. After all, if gender inequality is currently woven into the BBC’s framework, a trusted and publicly-funded organisation who are perceivably far more accountable to stakeholders than the majority of their competitors, then it begs the question; how can companies be urged to be more transparent in the way they treat their employees?

How did this gender pay gap slip under the radar for so long? Gender inequality across salaries has long been something spoken about, however, it has traditionally been hard to pin point where it is happening. There is a relatively obvious solution to this problem. Companies that report on non-financial issues, such as diversity and gender equality, can address them, as the matter is out in the open and organisations can be held to account. Indeed, issues such as these may well be something that companies themselves do not realise, until they are forced to report on it and are thus made aware of it. The key therefore to solving this issue is to ensure that organisations increase transparency to their stakeholders.

There are several ways in which large companies in the UK are now being driven into transparency, one of them being the EU Non-Financial Reporting Directive (EU NFRD). Introduced by the EU in 2014, the EU NFRD aims to improve the transparency and consistency of non-financial disclosures by large businesses.

Click here to download the free EU NFRD guide

 

What is EU NFRD?

The EU NFRD was introduced by the EU in early 2014 and transposed into UK law in late 2016. The EU NFRD applies to all financial years starting on or after 1st January 2017. It is now mandatory for public interest entities (including listed companies, insurance undertakings and financial institutions with over 500 employees) to report on five key matters:

  • environmental
  • social
  • employee
  • human rights
  • anti-corruption and bribery.

Specifically, companies will be required to report on (for each of the five non-financial matters) policies which they have set out and the outcomes of the derived policies. Where no policies have been pursued, the company must offer a full explanation for why this is the case. This Directive compliments a number of other non-financial reporting-focused legislative requirements introduced over the past few years such as the Modern Slavery Act. However, questions remain around how companies will choose to comply with the legislation and whether the NFRD will be enough to make transparency and accountability an integral part of large businesses.

How can the EU NFRD bring about transparency?

As companies begin to start (or improve) reporting on non-financial matters, and transparent reporting becomes the norm, rather than exception, within the business community, it will start to become obvious which matters organisations have addressed and which they haven’t. The way these key non-financial matters are addressed is very important because it could begin to have a catastrophic impact on companies’ reputation.

Companies have the choice to reveal all or state why they are not reporting on specific matters, however it’s not likely to reflect well on a business if it they freely admit they are doing nothing to tackle social issues, such as gender inequality. Given the qualification thresholds, as public interest entities begin to report on these matters, other non-qualifying companies risk being left behind and also risk a reputational shadow being cast upon them thanks to assumptions made by the public based on their choice not to disclose. It is essential that companies understand and address the requirements in the EU NFRD to ensure transparency of reporting, and ultimately, tackle these non-financial risks.

 

To learn more about the EU NFRD, what it requires and who is caught by it, download a copy of our free EU NFRD guide here

The 2017 UK conversion factors are released

The arrival of the much-anticipated 2017 Defra UK conversion factors for greenhouse gas (GHG) reporting confirms a step change in the carbon intensity of the UK electricity grid and will pose a significant challenge for businesses when they disclose their emissions performance later in the year.

The headline drop of 14% on the electricity consumption conversion factor compared to 2016 will benefit businesses reporting performance on location-based emissions considerably. It will, however, also pose a challenge to articulate, with businesses across the board expected to report greatly reduced electricity emissions (the most major emissions source for many). Not getting internal and external commentary around annual performance right risks:

  • Internal momentum on energy efficiency being lost against a background of seemingly stellar performance, or alternatively;
  • External articulation of performance to stakeholders becoming shrouded by the reducing conversion factor; diluting the recognition of the tangible emissions reduction actions taking place.

Given the rapidly decarbonising grid (the UK electricity conversion factor has fallen 23% since 2015), 2017 could be a trigger year for more businesses moving to market-based reporting and target setting. This would ensure that carbon reduction successes are more directly correlated to proactive business decisions, rather than the influence of macro energy market investments and government policy.

So what else is new for 2017?  In the latest edition, keen reporters will also find that:

  • Plug-in hybrid and battery electric vehicles now have distance based factors available across scope 1, 2 and 3 (transmission and distribution)
  • Hotel stays have been added on a per room per night basis for 24 global markets
  • Domestic and short haul flight conversion factors have decreased by an average of 4% whilst long haul flights from the UK have increased in intensity by an average of 3%
  • Overseas electricity continues to be absent from the factor set, with users signed posted to the IEA to source factors. Scope 3 electricity transmission and distribution factors are still available.

All in all, there is considerable work ahead for reporters this year as they find the right narrative to explain their 2017 emissions performance, adapt to the alignment of CDP questionnaires with the TFCD (Task Force on Climate Related Financial Disclosure) recommendations and increase the breadth of their ESG (Environmental, Social and Governance) disclosures in response to the EU Non-Financial Reporting Directive.

 

If you have any questions related to UK or IEA conversion factors, CDP disclosure or wider ESG reporting, get in touch Julie.craig@carbonsmart.co.uk / 0207 048 0450.

Just received your CDP summons? Our top tips for scoring success in 2017

Last week, over 5,800 global companies received their annual call to action from the CDP. Over the coming months, the reporting community will gather strategic, qualitative and quantitative evidence to respond to their investors regarding environmental performance.

But, how do you score well without spending every waking moment perfecting your response? Here are our top tips to take the pressure off:

  • Plan ahead – your CDP response should be a collection of your sustainability successes throughout the year; try writing up your journey as you go along rather than scratching your head at the end of the year for good news stories
  • Keep abreast of barriers to success – the CDP framework means you can’t access top marks without embedded targets and third party verification; so ensure you have engaged the right internal and external parties to achieve these
  • Live and breathe the scoring matrix – a key stumbling block for businesses is lack of knowledge of the how the CDP responses are scored. Even the most well crafted responses can still score poorly if they miss out the basic requirements – spend time studying what CDP is looking for before you put pen to paper
  • Ask for help – we have worked with a range of FTSE listed organisations, consistently helping them to improve their narrative and boost their scores

Carbon Smart has helped clients to maximise their CDP results year on year – whether your business needs strategic advice on how to boost your scores, assistance to manage the response process, or to gain third party verification of your sustainability reporting in time for the deadline, Carbon Smart are ready to step in and help.

Marie Broad, Head of Corporate Social Responsibility at SThree Plc said:

 “We were really pleased to work with Carbon Smart on our CDP submission this year and increase our score from an E to a B. We find the team very professional and efficient in helping us progress on our environmental agenda.” 

To learn more about the CDP requirements and how to boost your score, please get a free copy of our CDP paper here.

Get in touch to talk through your requirements: Julie.craig@carbonsmart.co.uk / 0207 048 0450

My top 5 tips for scope 2 dual reporting success

For global organisations, scope 2 dual reporting can be nothing short of a nightmare. The guidance is complicated, the terminology unfamiliar and the global availability of information hugely variable. Organisations risk material misstatement of their market-based emissions if they don’t get their approach right.

With all these challenges at play, it can be tempting for environmental reporting managers to request as much utilities billing / evidence as possible from regional reporting teams and attempt to co-ordinate market-based reporting from the centre. This is a common and costly mistake for a few reasons – the time consumed in trying to process high volumes of evidence, the challenge of translation, and lack of understanding of the local energy landscape.

So here are my top five tips for global organisations trying to source market-based conversion factors:

  1. Empower each market – your regional reporters can be your local experts; with the right training regarding the conversion factor hierarchy and acceptable quality criteria they can, and should be, responsible for retrieving the required market-based factors
  2. Provide context – invite regional reporting representatives to a training workshop – help them to understand what market-based reporting is, the benefits of getting it right, and your organisations’ wider strategic energy roadmap
  3. Start with the basics – some regional reporters may never have seen their utilities bills, or know where to find them. The first questions to ask are whether there is any evidence related to energy purchases available; or if it is even possible to purchase market differentiated energy in that region
  4. Leverage your procurement team – where reporters need to get in contact with their energy providers to source supplier specific conversion factors, they should go through their procurement team, raising the question with dedicated accounts managers – this will be far quicker than contacting a utility providers’ customer services
  5. Admit defeat (eventually) – where it’s not possible to source market factors specific to your purchases; remember, residual factors and location based factors can be used as a default- effort need to be proportionate to material gain

Scope 2 reporting is in its infancy – globally, utilities providers aren’t necessarily ready to respond to their customers’ requests for information; particularly where regulation hasn’t forced the issue (the UK has the Fuel Mix Disclosure Regulations that requires utilities companies to disclose information on standard tariffs for example). Over the coming years, the market will mature; but in the meantime, regular communication and engagement with regional teams is the best recipe for success.

“The scope 2 workshop was insightfully presented. The exercises included were particularly good, as they give you the occasion to ‘get your hands dirty’.”
-Neil Quayle, Corporate Responsibility & Sustainability Analyst, Capgemini

Julie Craig regularly delivers Carbon Smarts’ scope 2 masterclass for organisations wishing to engage their global reporting teams. Get in touch to discuss your training needs: julie.craig@carbonsmart.co.uk or 020 7048 0450.

Got an ISO 14001 management system? Here’s what you need to know about the new version

This September saw the arrival of the new ISO 14001 environmental management system standard. Every five years, a revised version comes out to ensure it is still up to date, requiring companies to make a few changes to their processes to make sure they are in line with the new requirements.

What’s different?

The revised version seeks to ensure environmental management forms an integral part of the company’s business strategy and is not an isolated item. It looks at environmental challenges on a broader scale and sets requirements to help companies follow through on their commitments. The system has some new clauses and some restructured ones, including the following:

  • Clause 4: Context of the organisation – a new clause, it will reflect what affects the organisation’s way of managing environmental responsibilities (financial, regulatory, etc.).
  • Clause 5: Leadership – this clause has been developed to make sure the system gets support and commitment from top management.
  • Clause 6: Planning – this clause is there to ensure the right level of awareness and the right competencies are available to achieve certification.
  • Clause 7: Support – certain requirements are tougher, to ensure consistency within the organisation. Amongst them, the requirement for an improved communications strategy, both internal and external.
  • Clause 8: Operations – it now looks at the whole value chain to see how it impacts the management system, and how the organization affects it.
  • Clause 9: Performance evaluation – this one takes elements from currently existing clauses regarding monitoring and reviewing, so that companies gather the right information to show they are fulfilling their goals

An important change is that the system now has a common structure with other ISOs to make life easier for companies that have more than one management system in place.

How does that affect me?

Now that the new version has come out in September, you have to update your current ISO 14001:2004 to ISO 14001:2015 by reviewing your processes and making sure they’re in line with it. You should have three years to do so.

Call us to find out more about what you need to do to get up to date: 0207 048 0450.

 

2015 conversion factors released – time to update your reporting

Carbon Smart has once again worked with Defra and DECC to put this year’s conversion factors online via their dedicated platform http://www.ukconversionfactorscarbonsmart.co.uk/. All organisations that report their greenhouse gas emissions should use them to calculate their carbon footprint for 2015.

So what’s new for 2015?

  • A 6.5% drop in the UK electricity generation factor compared to 2014
  • For the first time, the conversion factors are based on the UK greenhouse gas inventory (GHGI) in alignment with the 2006 IPCC Guidelines for national inventories including updated fourth assessment report global warming potentials. This has caused methane (CH4) and nitrous oxide (N2O) to noticeably fluctuate compared to previous years’ factors
  • Alignment of CRC reporting to the annual UK conversion factors
  • Introduction of additional refrigerant factors

With many organisations busy collecting data and conducting energy audits to ensure ESOS compliance, it’s certainly worth putting a review of the updated conversion factors on your to-do list so that your end of end of year carbon reporting and CRC submissions don’t get forgotten about.

Call us if you have any questions regarding the conversion factors and how to use them: 020 7940 8285.  

CDP: another type of reporting you shouldn’t overlook

Whilst most annual reports are now done and dusted, it is time for another kind of reporting to take place.

If you are a large company that wants to be credible when it comes to environmental commitment and credentials,CDP is the key to access green leadership and you should be thinking about completing their climate change questionnaire before their deadline in June – if haven’t done so already.

CDP, the sustainability disclosure scheme covering areas such as climate change, water and forests, has become the most respected way for companies to measure their environmental impact year on year. Over 4,500 companies across more than 80 countries report to CDP every year, including 71% of FTSE 350 – and a large majority of those choose to make their responses publicly available. Through its climate change questionnaire, CDP assesses the transparency, accountability as well as the measurement and management of companies’ environmental impacts and gives them a score based on their level of disclosure and performance. Top companies are listed in the Climate Disclosure Leadership Index and Climate Performance Leadership Index.

But actually hitting those high scores can seem like a bit of a challenge. There are a few tricks to answer the questions right and provide CDP with the information they are looking for. Whether you have never replied to the questionnaire before or you are looking for ways to improve previous performances, boosting your score is possible, even for this year with the deadline fast approaching.

Here a few tips to find your way to a top score:

  • Engage your compliance, legal and/or financial teams when it comes to reviewing your company’s approach to risks and opportunities
  • Review score responses from top companies in your sector to draw a few lessons
  • Make sure you link emissions reductions you achieved to specific activities that contributed to these reductions
  • Focus your attention on sections that represent a high percentage of the total score
  •  If it’s not your first time, get feedback – the CDP team can provide you with comments about your past responses.

Achieving a higher score is possible and within reach if you follow these tips alongside a few others.

If you have any further questions after reading our SmartPaper, get in touch with Miruna at miruna.valmar@carbonsmart.co.uk.

 

Rathbones win at the 2014 ICSA Excellence in Governance Awards

Carbon Smart are very proud to announce Rathbones’ success at the ICSA Excellence in Governance Awards 2014. Rathbones won the ‘Best Sustainability and Stakeholder disclosure – FTSE 250’ category on 12 November against great competition for the quality of their 2013 annual reports and accounts.

The award citation stated that “this company presented a good overview of activities that a financial institution can and should be doing in the sustainability space. Sustainability was well linked with strategy and risks, and the CEO chairs a social and environmental committee, which is formed by members of staff. CO2 intensity was measured under a variety of metrics and there was good coverage of how environmental concerns are addressed in their day to day operations – building energy use, travel, paper, waste, refrigerants, carbon footprint, etc.”

Carbon Smart has been supporting Rathbones with Corporate Responsibility reporting for six years, out of which Rathbones were shortlisted three times for the same category, in 2009, 2010 and 2014. We are pleased to see such positive outcomes from a very fruitful and long-standing reporting relationship.

2014 conversion factors: beware of increased electricity values

Although round 1 of mandatory greenhouse gas (GHG) emissions reporting is just behind us, it is essential to start thinking about next year. Regularly collecting data across the year can help improve consistency and accuracy, but also allows reporters to spot anomalies in their data as they occur, allowing time for mitigation steps rather than end-of-year surprises and missed reduction targets.

The new conversion factors for this year came out in June and revealed that the factors for electricity have increased by 11%. As a consequence, businesses whose electricity usage hasn’t changed between 2013 and 2014 will still see their stated greenhouse gas emissions go up by 11% regardless.

With these figures in mind, businesses should take action now in order to mitigate the issue in time for reporting. The significant change will make it more challenging to communicate improved performance or indeed steady performance. This will apply to both absolute reporting and to intensity metrics such as emissions per employee.

As the host for the UK Government’s conversion factors repository, Carbon Smart has a deep understanding of GHG reporting and we are aware that an increase in emissions can be challenging for a business in terms of reputation and credibility. Carbon Smart can advise you on how to prepare your business and stakeholders and discuss the best steps to take now to improve your reporting.

The new Energy Savings Opportunity Scheme (ESOS) also requires large organisations to identify electricity savings in the years to come: take advantage of this new scheme’s obligations now and build the benefits into your future GHG emission reporting.

New energy legislation for large organisations

The Energy Savings Opportunity Scheme, the UK government’s response to the 2012 EU Energy Efficiency Directive, requires large organisations to measure their total energy consumption for a period of twelve months starting before the end of 2014.

With the end of the year fast approaching, it is worth making sure whether you’re in or out, and what you should do now if you are covered by the legislation.

All large organisations have to register with the Environment Agency and ensure they are collecting the required data to start measuring their total energy consumption in the coming months. This should include buildings, industrial processes and transport. It requires more energy data to be collected than CRC or mandatory GHG reporting schemes.

A large organisation for ESOS, has:

  • 250 or more employees, or
  • An annual turnover of at least £39 million and an annual balance sheet of at least £33 million.

Once you have measured your energy consumption, you will have to carry out energy audits for 90% of the energy used across your business, write a report to be signed off by an Approved Lead Assessor and ensure it is approved by the Environment Agency before 5th December 2015.

With a vast amount of experience in supporting businesses to achieve legal compliance, Carbon Smart is ideally placed to guide you through ESOS in an effective way. Whether you simply need someone to help you tick the boxes or could use this opportunity to look into cost-effective energy consumption changes, we can offer our knowledge and experience to build your own, tailored, ESOS response.

Contact us now to discuss your ESOS requirements to be ready before December.

Know thy energy: ESOS and it means for your business

The new legislation – The Energy Savings Opportunity Scheme (ESOS) – is the UK Government’s proposed approach to leading large enterprises through comprehensive and regular energy audits.

 

The world’s energy conundrum is a tough one: on the one hand energy dependency is substantially increasing, whilst on the other hand, resources are diminishing and the need to reduce consumption is becoming more urgent. Energy efficiency should therefore be a fundamental consideration for UK business, both in the quest for energy security and in limiting the impact of climate change.

With the aim of establishing concrete objectives to improve energy efficiency, the EU passed the 2012 EU Energy Efficiency Directive (2012/27/EU), which stipulates a 20% energy efficiency target to be met by 2020 by member states. Crucial for the private sector is Article 8, which requires all member states to introduce a mandatory requirement for all large enterprises to undertake energy audits every four years.

The Energy Savings Opportunity Scheme (ESOS) is the UK Government’s proposed approach to implementing the requirements set out in Article 8, and is currently being established by the Department of Energy and Climate Change (DECC). The scheme sets out a broad legislative framework, supported by best practice guidance, which aims to lead large enterprises through comprehensive and regular energy audits.

Under the proposed mandatory energy audits, large undertakings will be required to measure their entire energy consumption over the course of a 12 month period and to determine their most significant energy usage. Organisations will also be required to include assessments of the following three areas: key buildings, transportation and industrial/ commercial processes.

The objective of the regulation is to ensure that the companies which are considered to have the largest energy use understand all aspects of that use in relation to their business: from supply, transformation, transmission and distribution to consumption. Through acquiring the detailed knowledge on energy use, it is hoped that those organisations will make better decisions in terms of good energy management.

Importantly, this month, DECC are due to announce the requirements of the legislation, determining the ESOS compliance criteria. Leading up to the announcement, we are advising all businesses to determine whether they are within the ESOS scope and if this is the case, to start to consider where the gaps may be. We are also urging companies not to treat the legislation as another layer of environmental red tape on top of the existing regulation, but to take the opportunity to examine their energy use and make savings.

There are great benefits of comprehensive energy audits or management systems. Understanding the entirety of your business’s energy system will allow you to identify areas of inefficiency, wastage and perhaps even vulnerabilities within your operations. Being able to address these areas effectively will enable you to minimise your resource consumption, reduce costs, whilst at the same time improving your environmental credentials.

Read our ESOS briefing SmartPaper to learn more about how ESOS will affect you. If you would like to have any further information on energy or environmental management systems or how to comply with ESOS, please contact our London or Manchester based offices for further advice.

Domino’s Responsible Delivery Plan

Domino’s Pizza are recognised as the leading pizza delivery company in the UK and Ireland; Domino’s Pizza Group (DPG), the UK Master franchise, believe that part of maintaining the Group’s solid reputation  is its ability to not only operate in a responsible manner but lead the way for franchises to follow.

Two pieces of regulation, phase II of the CRC energy efficiency scheme and mandatory GHG reporting, prompted DPG to take a closer look at the impacts of its operations and set the direction for how the Group would manage its environmental impacts in the long run. The Group was keen for the vision to be both realistic and a true reflection of their sustainability ethos and turned to Carbon Smart for guidance. Our team worked closely with their CSR team to identify and measure impacts, provide the Group’s first international carbon footprint, set out ambitious but realistic goals for reducing this and prioritise areas for action. In March this year DPG published its Annual Report which launched this vision under the Group’s first CSR strategy: Domino’s Responsible Delivery Plan.

Together we were able to turn the sudden regulatory burdens DPG was faced into opportunities for driving change. For instance, following the launch of the strategy, DPG rolled out a regular energy monitoring system to over 700 franchise stores. To access Domino’s Responsible Delivery Plan and read more about their impacts and strategies to reduce these, visit their CSR page at corporate.dominos.co.uk/csr .

A day out at the ICSA Corporate Governance Conference

Carbon Smart exhibited at the 6th ICSA Corporate Governance Conference on March 19th.

ICSA (the Institute of Chartered Secretaries and Administrators) is the chartered body representing Company Secretaries and others involved in governance, risk and compliance. Many of its members are responsible for reporting greenhouse gas emissions for their companies, under new mandatory regulations requiring all UK quoted companies to include their greenhouse gas emissions in their Annual Directors’ Report. It was our first foray into exhibiting at an ICSA conference, with sessions on risk reporting and supply chain governance piquing our interest as great examples of the risks that businesses can avoid by taking sustainability into account.

We were on hand to help with any mandatory reporting queries which the delegates had, as well as offering some free consultation support to help company secretaries and their teams ensure they are in fact following best practice reporting principles.

If you saw us at the Conference and want to drop us a line, or if you would like to enquire about the free support we are offering, get in touch.

Analysis

Degree day analysis helps organisations to evaluate energy performance

Deciphering the impact of efficiency measures on your energy consumption from the noise of seasonal influence can be challenging.  All it takes is one harsh winter and all reduction targets are off. One method for improving your understanding of anticipated and actual energy consumption is to undertake an exercise known as degree day analysis.

For those new to the topic, degree days are a measure of the severity and duration of adverse weather, both hot and cold. Every degree Celsius above or below a set base temperature counts as a degree day. The cumulative degrees days for a specific day, month or year gives an indication of what the weather was like during that period. More importantly, they can tell us how hard our heating systems are working to compete with fluctuation in outside temperature.

Fortunately the winter of 2013/14 has been mild, resulting in reduced gas and electricity heating bills across the board. A question to ask is, have you reacted and adjusted your current energy management to benefit from potential cost, resource and emission savings? Using degree days to monitor the influence of weather on energy consumption profiles will identify opportunities for savings and isolate anomalies from expected consumption (i.e. increased consumption due to renovation works, a faulty meter, a busy visitor period, etc.).

Carbon Smart recently completed degree day analyses with the Home Office and the Religious Society of Friends to understand how the harsh winter of 2012/13 impeded their energy saving efforts. For the Home Office, the results concluded that despite the harsher weather, they achieved a 41% reduction in carbon emissions compared to forecasted levels. Our evaluation also highlighted that under favourable weather conditions a further 30% reduction could have been achieved. The analysis provided confirmation that the energy savings measures had been a success and strengthens the argument to continue their efforts going forward.

How can degree day analysis help you?

  • Degree days can inform adjustments for thermostat set point and Building Management Systems to reduce overall building        energy consumption
  • Identify expected and forecasted savings from actual consumption
  • Understand performance improvements against year on year targets as a result of energy efficiency measures and forecast          ongoing trends
  • Isolate anomalous data and highlight potential energy savings opportunities

For further details on how degree day analysis can support and interpret your energy saving efforts, contact Becky at becky.paffard@carbonsmart.co.uk or call 0207 920 8285.

Lessons in smart assurance from our 4th Annual Index

The fourth edition of the Smart Assurance Index reveals which FTSE 350 companies aren’t backing up their sustainability claims and which are backing them up by carrying out sustainability assurance. This is the process that provides third party verification of the data and procedures upon which reporting rests. CRH, the building materials group has topped the index this year ending Vodafone’s two year reign. CRH are producing a clear assurance statement that effectively communicates to stakeholders and adds to the value of its reporting by increasing the reliability, accuracy and overall robustness. Scoring highly across the 15 criteria Carbon Smart uses to assess these statements, CRH have produced a statement that is clear about the scope of the engagement, uses recognised standards and properly cites the credentials of the third party assurance provider including a declaration and explanation of their independence to the reporting company. Other top performers include British American Tobacco, Diageo, Royal Bank of Scotland and BP (who have significantly improved this year). These are examples of companies who are verifying the claims they are making in a clear, transparent manner.

Big names such as International Personal Finance, Home Retail Group, Travis Perkins and TUI Travel still have work to do to raise the credibility of their sustainability assurance and as a result find themselves in the bottom grouping of the index. These companies are producing statements that: are unclear in the scope of what the assurance covers; lack credentials of the assurance provider; and do not satisfy independence requirements. 280 of the FTSE 350 companies do not carry out sustainability assurance at all. This includes well known companies such as easyJet, Rolls Royce, Sainsbury’s and companies with big environmental impacts in the petrochemical and basic material industries such as Antofagasta, Kazakhmys and Vedanta Resources.

In the context of ever increasing public scrutiny and new regulations making it mandatory for companies to report environmental metrics, the risks associated with reporting inaccurately are rising. The Smart Assurance Index continues to track how well companies are responding to these developments and pressures and reports how the quality of assurance statements has improved over the last four years. Two thirds of companies now produce an assurance statement that is clear about the level of assurance that has been carried out, and the environmental data or processes under review, a 25% increase on what we reported in 2009. BSkyB, for example, are vocal about developing their assurance and expanding it to include more indicators, using that process to enable them to communicate more effectively with their stakeholders. As a result they have significantly improved their position in the index.

However, the report finds that the quality of statements remains poor in two key areas. 50% of statements are failing to state the credentials of the assurance provider. Given assurance is carried out on a voluntary basis, and is not regulated, the value assigned to it relies heavily on the way it is carried out. In addition to this 20% of statements cannot claim to be independent; the declaration is either insufficient or there is reason to believe the provider is falsely claiming independence. Whilst professional qualifications aren’t listed and the independence of the assurer is not explicitly declared, the value in seeking third party verification is limited. Proper accounting and reporting is required if environmental metrics are to stand up next to financial metrics, and companies are to make the transition to more sustainable business models.

The new legislation requiring companies to report their GHG emissions will affect how assurance is carried out. With the risks of reporting inaccurately intensifying as a result, the importance of consistency and comparability in the data being reported is paramount. The report’s analysis of companies’ response to this new piece of legislation reveals that of the 64 companies that assure carbon, a surprisingly high 47% are yet to declare a carbon intensity metric. Where one organisation reports 1 tonne of CO2 per £m revenue, another generates over 18,000 tonnes. Companies vastly differ in what they choose to include in their carbon footprint and this raises both challenges and opportunities: With corporate sustainability performance moving further into the spotlight and more and more data entering the public realm, companies’ data will be scrutinised by stakeholders. It is therefore imperative that these companies are transparent about what they have included in their reporting and that their reporting choices are communicated clearly.

Workshop series on greenhouse gas reporting: conversion factors, regulation and guidance

n 2013 Defra appointed Carbon Smart to lead a review of the UK’s conversion factors for greenhouse gas reporting. The goal of the review was to improve the usability of the factors through simplification and the development of an online tool to better navigate them. The resulting changes to the factors themselves and the way they are presented will affect any organisation that reports on emissions in the UK.

As part of the overhaul, Defra have relaunched their environmental reporting guidelines and finalised the mandatory greenhouse gas regulation for quoted companies.

business seminarThese positive actions aim to propel both greenhouse gas disclosure and low carbon operations forward, as the UK strives to reach ambitious carbon reduction targets.

Central to all of these changes is the need to simplify greenhouse gas disclosure and keep reporting as easy to follow as possible, freeing up organisations to take real action.

If you are new to greenhouse gas reporting, or haven’t quite kept up with the changes to Defra’s guidance, the new regulation and the 2013 conversion factor format, book a place to one of our workshops to enjoy a masterclass with members of the Carbon Smart team.

The workshops will be held in:

London – 26th November 2013 (Location and time TBC) click here to reserve a place

Manchester – 28th November 2013 (Location and time TBC) click here to reserve a place

Edinburgh – 29th November 2013 (Location and time TBC) click here to reserve a place

Places are limited and will be confirmed in due course with exact locations and timings.

CRH, the building materials group tops the Smart Assurance Index for the first time

Carbon Smart: Launch of 'The smart assurance index 2013'Carbon Smart has published its fourth annual Report and Index on the state of sustainability assurance, which ranks the assurance of the FTSE 350 companies, highlighting the top performers and those still with work to do. CRH, the buildings materials group has topped the Smart Assurance Index for the first time, ending Vodafone’s 2 year reign.

Assurance is the third party verification of companies’ reported sustainability data and procedures, which aims to reduce the risk of material error in their corporate sustainability reports. 280 of the FTSE 350 companies don’t carry out assurance, which begs the question: Where is the value in assurance?

  • With the introduction of MGHR (Mandatory Greenhouse Gas Reporting) coming into affect this year, these FTSE 350 companies are legally required to report on their carbon and to ensure that their reporting is accurate.
  • There is increasingly greater reputational risk on companies to get their reporting right; with pressure from stakeholders (including clients, investors and environmental campaigners) to be reporting clearly and comprehensively on sustainability performance

Download the Smart Assurance Index to find your place in it and discover more about trends in sustainability assurance for 2013: http://www.carbonsmart.co.uk/opinion/the-smart-assurance-index-2013/

Top companies join our masterclass to ensure carbon reporting is right

You might think that the largest companies need little assistance with their annual carbon reporting, however the extensive changes to Defra’s reporting requirements this year has made even the biggest players take stock.

Sainsbury’s, BP and Coca Cola Enterprises (amongst 40 other private and public sector giants) joined Carbon Smart’s reporting masterclass to understand the practical implications in carbon accounting terms, but also the impact on stakeholders’ perceptions of this years’ reporting.

Andrea Smith from the CDP began proceedings with a whistlestop tour of the new Mandatory Greenhouse Gas Emissions Reporting regulation.  Our discussion with the room revealed that the requirement for organisations to report an organisation-wide carbon intensity metric remains one of the most controversial areas of the new regulation.  In particular, the extractive industries and diverse financial institutions are struggling to find meaningful metrics that represent their organisations’ activities and accurately portray their sustainability story year on year.

Exploring aspects of the new Defra reporting guidelines Ben Murray from Carbon Smart worked with the delegates to tackle the challenge of data collection.  Comparing sustainability reporting to financial reporting, he pointed out, “sustainability reporting, unlike financial reporting, is not a mature, ingrained process with clear communication channels in an internationally understood language; it is a practice that is thus far based on best endeavours across a tangled web of different departments, many of which are not employed to produce sustainability figures.”  Ben’s top recommendation to organisations is to use a widely communicated reporting protocol to highlight the importance of each piece of data collected, and emphasise responsibility for data accuracy in the context of the organisation’s final report.

Rounding off the session; Julie Emmings from Carbon Smart led a technical session on the 2013 conversion factor changes.  Although the changes have short term implications, the long term horizon is that reporting will be simpler and fewer retrospective changes required leaving organisations with more time to get on with carbon reduction action.  One organisation contributed, “No one likes change, but change is overdue; this is a big improvement on the previous approach, cleaner, tidier and more consistent with other international approaches”.  We invite you to judge for yourselves at: www.ukconversionfactorscarbonsmart.co.uk.

The masterclass has clearly demonstrated that with the new legislation, many high profile organisations are keen to get their reporting right first time; putting effort in to clarify the requirements up front.  We would advise other organisations to follow suit and reduce the risk of trying to rectify issues on the eve of a reporting deadline.

If your organisation needs assistance getting up to speed, Carbon Smart offers  a range of reporting training modules, guidance and implementation support, please contact us on 0207 940 8285.

The State of Sustainability Assurance Four Years On

assurance 2011According to the Global Reporting Initiative 95% of the top 250 global companies now produce a sustainability report as a means of communicating their environmental and social governance to their stakeholders. However, while the financial information provided in the annual report must by law be verified by an independent, accredited auditor, the information presented in the sustainability report is under no obligation for review. This summer, Carbon Smart has once again undertaken a comprehensive investigation into the state of sustainability assurance amongst the FTSE 350 companies. To date the annual research and report has been instrumental in highlighting the need for advancements in this area. Often referred to as ‘the wild west’ of sustainability reporting; assurance, the process of verifying the reliability of the information contained in the report and the processes involved in shaping it, is an unregulated area. As a result there are no requirements to comply with standards; the way in which it is carried out varies hugely and this raises questions amongst stakeholders regarding its legitimacy, and ultimately, its value. Robust assurance standards have been developed, such as AccountAbility’s AA1000AS Standard and the International Standard on Assurance Engagements 3000, which require minimum levels of professional conduct and methodological rigour. However, the lack of obligation to adhere to these standards means the quality of sustainability assurance varies hugely.

Assurance is seen by many companies as a box-ticking exercise with little value attached. Carbon Smart’s research challenges the business community to review the way in which it carries out assurance and to better align it with the needs of their stakeholders. Since the release of our first report in 2010, significant progress has been made, and this is reflected in the Carbon Smart annual league tables of assurance. The uptake of assurance has risen by 10% and there has been keen interest from companies to improve their positions in the league table.

The increased scrutiny and pressure companies now face from stakeholders and government, to report transparently and accurately, means the degree of reputational risk associated with assurance is ever increasing. Companies are using our report and best practice guide to extract real value from the process; challenging their assurance providers to fully engage with their sustainability reporting goals, and to produce a statement that meets the requirements of their external stakeholders. We have seen this manifested in many ways from stipulations in Requests For Proposals (RFPs), to companies talking about the advances they have made in quarterly earnings calls to investors.

Once again the release of this year’s report, due to take place in October, will highlight this year’s leaders as well as those requiring improvement. Using strict criteria based on the requirements of established assurance standards, each statement is scored to reflect how well it meets stakeholders’ needs.  In a wide ranging consultation with stakeholders, these needs include: a clear expression of the scope of the assurance, a discussion around materiality, competency and independence statements by the assurance provider, use of recognised assurance standards and a clear, consistent  statement that does not mislead.

In light of the increased demand from stakeholders on companies to report accurately, transparently and materially, and the associated demand for better assurance from the public, press and government, this report promises to continue to focus attention on the assurance sector. With each report issued by Carbon Smart, better standards of practice are being adopted. This year’s report will be released mid-October at our annual launch event and we look forward to disseminating the key messages of this year’s research.

Avoid reporting pitfalls – follow Carbon Smart’s top tips for time efficient greenhouse gas disclosure

More frequently than ever, sustainability metrics are a feature of business decision making from a strategic, financial and reputational perspective. Whether for voluntary or compulsory purposes, greenhouse gas reporting is increasing.

However, increased reporting also means more public scrutiny.  Given the reputational risk, reporting organisations can ill-afford to get their environmental declarations wrong.  On the other hand, those responsible for sustainability reporting (unlike those typically responsible for financial reporting) are often conducting multiple job functions; reporting may be just one facet of working life, which can divert much needed resource away from the real task at hand; sustainability action.

Carbon Smart have worked extensively with organisations reporting both voluntarily and for compliance purposes and we know that time committed during reporting preparation and other key moments in the journey pays dividends.  Follow our top reporting tips to get your data in line, on time.

1.       Know your conversion factors from the beginning, start by reading the guidance in Defra’s frequently used conversion factors at: www.ukconversionfactorscarbonsmart.co.uk/

Defra’s conversion factors have undergone a complete overhaul for 2013.  Some organisations using the Defra conversion factors will need to rebaseline their data to align with the new approach so make sure your organisation is prepared for the adaptations that will be required.

 2.       Take time to fully understand your organisational boundary: clear definition up front improves consistency and ensures relevance down the line

Many organisations struggle to report consistent results year-on-year because their organisation has a complex structure and each year best data collection endeavours cover different subsidiaries, brands or operations.  Clearly understanding what you should and are including within scope (or need to include in terms of regulatory reporting) can significantly reduce confusion later on.

3.       Establish your reporting protocol to enable transparent and consistent calculation methodologies

Without clear, transparent documentation of reporting methods, organisations small and large may struggle to replicate and align calculations across different business divisions or between years.  Organisations seeking external assurance for carbon data may enjoy an easier assurance audit if the clarity and transparency of their processes is documented and adhered to.

4.       Collect data early, and regularly, it pays dividends in terms of the completeness and accuracy of reporting

It goes without saying really, but the sooner your data collection begins the sooner it will end and there will be plenty of time to ask questions, sanity check increases and decreases in data and generally make sure your reporting is accurate.  Hasty data collection and calculation can leave reporting littered with assumptions or even errors; this might mean complex data restatements in future and dilution of the integrity of your sustainability messages.

 5.       Push for high quality data (i.e. direct fuel usage over distance travelled or spend data) this reduces the need for assumptions in calculations and ensures reporting accurate enough to inform business action

Whilst time is rarely a luxury in reporting, making sure that the data you request / collect is of the best quality available can make the difference between business action and inaction.  GHG reporting based on spend information for example will need to be extrapolated to calculate emissions, this may undermine confidence in decisions based on the reporting.  Calculations based on primary data will be viewed as more reliable.

 6.       Communicate widely and frequently to ensure reporting turns into action rather than accountancy

A frequent pitfall for organisations is reporting their sustainability data quietly and neatly in a subsection of their annual report without engaging with investors, employees and other important stakeholder groups.  Make the most of all the time and effort committed to reporting, by communicating at every available opportunity and engaging your whole organisation in the sustainability journey.

Getting all these things right means your readers will understand your achievements better; their attention will be focused on your results not the shortcomings of your reporting.  Getting them wrong risks the reporting being the story, not the report.

Keeping up to date with the rapidly moving reporting landscape is difficult, but a little more preparation would certainly, in our experience, stand most organisations in good stead.

Julie Emmings, Senior Consultant said, “At Carbon Smart we make sure to follow our own tops tips with each of our reporting organisations.  The launch of the new Defra conversion factors, for example, has wide ranging impacts on all of our clients.  Our current focus is on taking the time to brief clients on the changes that need accommodating over the next reporting cycle and helping them understand how to communicate these changes to stakeholders. Our clients will benefit greatly from this level of preparation (as well as the simplifications to the new Defra conversion factors) in the future.”

Defra conversion factor resources are overhauled in time for new mandatory greenhouse gas regulation

Simplification of the Defra conversion factors will require organisations (both experienced and new to reporting) to fully appreciate how recent changes affect their UK greenhouse gas reporting.  Some organisations using the Defra conversion factors will need to rebaseline their data to align with the new approach; others will find new simpler ways to get to the factors they need. There will undoubtedly be some short term pain, but longer term the gains will be significant as the impact of the simplification is felt.

Defra’s brief to sustainability consultancy Carbon Smart has been clear; simplification and improved usability of all aspects of the conversion factors is essential.  After three rounds of stakeholder engagement with cross sector organisations of all sizes and levels of reporting experience, the final revisions to content, guidance and navigation are now complete.

So what are the headline changes?

  • New online navigation system with downloadable excel outputs users can tailor
  • Simplification through location of guidance annexes (e.g. CHP, refrigeration) in Defra’s newly revised environmental reporting guidelines
  • Simplification of the convention to recalculate for updated factors
  • Reduced reporting ambiguity (e.g. electricity factors will be displayed as a 1 year grid average only)
  • Alignment of listings more closely with WRI Scope 3 protocol
  • Consolidation of complex information regarding the determination of the factors to the methodology paper

Julie Emmings, Senior Consultant at Carbon Smart said: “across the board the stakeholders we engaged with were ambitious in their future needs for the conversion factor tools; with strong emphasis on making the future resources simpler to understand, quicker to use and ultimately allowing them to get on with taking action”.

“This is a timely review of the conversion factor resources, which have organically grown over the last few years and become quite difficult to navigate.  With the new mandatory greenhouse gas reporting regulation bringing through hundreds of new reporting organisations we really needed to bring a fresh new approach,” she added.

Carbon Smart have specifically focussed on improving the user-friendliness of the conversion factor tools and provided simple, jargon-free guidance to assist different user groups through the transition to the new format.  The ultimate aim has been to make conversion factor selection the least time consuming part of the reporting journey.  Feedback from users who have trialled the new online solution has been very positive.

The new conversion factors resources were launched on 12th June and can be found at: www.ukconversionfactorscarbonsmart.co.uk.