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DIRECTIONSSUPPLEMENT
MARCH /APRIL 08
TRENDS AND ISSUES IN THE WORLDOF CORPORATE REPORTING
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Why companies should look out or the pitallso not joining up carbonmanagement, internalengagement and externalcommunications.
The climatechange challenge
 
Directions Supplement
March/April08
So does your business have the internal processesand systems in place to justiy your rhetoric and help you avoid the traps that lie waiting or you?
LucieHarrildHeadofCRCommunicationsSalterbaxterlharrild@salterbaxter.com
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.
Douglas JohnstonDirector, Corporate Responsibility ServicesErnst & Youngdjohnston2@UK.EY.COM
There is no point in reporting your position on climatechange and your activities simply to be seen to bedoing the right thing. Companies need to understand the impact o climate change on their business, haveclear plans to improve perormance, understand  progress in perormance and be able to provide anaccurate picture o this perormance to stakeholders.
Ernst & Young and salterbaxter are holding a seminar in May toopen the topic o this edition upor debate and discussion.I you’d like more inormation please do get in touch. You canemail: directions@salterbaxter.comor call us on +44 (0)20 7229 5720
 
“ Businesses stand a much better chance o deliveringagainst their targets becauseemployees areengaged and empowered.” 
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%conrm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dene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
“ Climate disclosuresmust be accurateand they mustclearly reect boththe reasons whyan organisationconsiders it to beimportant and the principal activitiesin place to manage perormance.” 
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identied,gatheredandreported.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benetsofprojectstoreducecarbonintensity.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condenceincarbondatameansthatthequalityofthisinformationvariesfromreasonablewithinasmallhandfulofcompaniestopoor.Ifthisisakeybusinessissue–asmanystateintheirpublicreporting,thequalityofdataneedstoincreasesignicantlybeforeitcanbeusedtosupportbusinessdecisionmaking.Ifdisclosingdetailsofclimateperformanceandkeyprogrammesistodelivervaluetobusiness,companiesneedtodevelopmuchgreatercondenceintheclarityandintegrityoftheircarbondata.Putbluntly,thequestionhastobe:
Why disclose something if you’re notsure you can believe in it yourself?
Methodologiestoestimateandreportdataoftensetoutahierarchyofmeasurementoptionswhichvaryincomplexityandaccuracy.Manyrsttimecarbonbaselinesusealowestcommondenominatorapproachtogenerateanumber.Therststepforanyorganisationhastobetoexaminethemethodsusedforgeneratingdataforitsmostsignicant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condenceinthedatafromthesesourcescanthenallowgreatercondencewhenmakingdecisionsaboutinvestments,regulatorydialogueandriskmanagementcontrols.
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