Examination of Witnesses (Questions 120
THURSDAY 8 JUNE 2000
120. We were in Canada recently where they do
that, and we were shown, at the Environmental Commissioner's office,
a graph of where all the various Government Departments were,
ranging from the very good ones to the very bottom ones, and we
asked him where his Department was, he actually did not know where
he was on the graph; and that demonstrated to me, I think, that
they did not quite know where they were. So you are saying it
should be not an internal observation more but a recognition of
how legislation is going to impact; that would be a way to start?
(Ms MacGillivray) There are some Government Departments,
that are obviously big property owners, like the MoD and Crown
Estates, that do have a big direct impact; but for others there
are many analogies to the financial sector, in that it is their
indirect impact that is going to make interesting reading, that
will actually be information that voters want to know about.
121. And best done on the web?
(Mr Adams) Yes, eventually.
(Ms MacGillivray) In terms of making it immediate,
real time, updatable, linking into reporting that Government Departments
have to do anyway, I think so, yes.
(Mr Rintoul) I think the other thing that breaks out
of is with some of the paper-based reporting. Some of the things
I am experiencing at the moment are, where Departments are reporting,
and there are only a couple, they are getting quite stressed out
at the end of the financial year because there is a whole ruck
of reports that need to be prepared in the same time frame, I
am not sure on the same data. To move to some sort of web-based
solution, which allows perhaps if not continuous but regular updating
of the information, rather than this big burst of activity to
draw in all the information and get a report produced in a certain
defined time frame, could actually be very helpful to Departments
in managing disclosure of information.
(Dr Woollard) I think English Nature ought to report
on its environmental performance.
(Mr Adams) Two things. Last week, I was in Hong Kong,
talking actually to some of Steve's people out there. The Hong
Kong Government is actually seeking an administrative order, requiring
all Hong Kong Government Departments to issue annual environmental
reports; this is the first year. They are the first in the region,
and, as far as I know, apart from Canada, they might be second
in the world, I have no idea.
122. Perhaps, Chairman we should go?
(Mr Adams) A field trip I feel coming on.
123. I did not say that.
(Mr Adams) The second point I wanted to make is, at
the end of the 1980s, ACCA used Andrew Likierman, who was then
at London Business School and is now Head of the Government Accounting
Service, to do a series of research studies on departmental financial
reporting and performance measurement, of which there was very
little in the UK. By the time he had been through, I think, three
of these studies, by the early nineties, I believe the Treasury
brought in a core set of financial reporting, annual reporting
guidelines and performance measurement standards. And, yes, they
were all over the shop; if you drew a graph of where they were
good or bad they certainly did not all come in at the same high
point on the graph, I do not think you can do that. But it is
only ten years ago that this country brought in a meaningful system
of financial reporting for individual Departments, non-governmental
bodies and performance measurement. I think you can do the same
again, in the environmental area, on very much the same premise,
with a central set of core issues; but also you have got to take
in that indirect issues are very important, the policy side of
it, but not to get hung up on that, because if you try to hold
it, how do we develop indicators that enable us to tell this year
how much we improved on the way towards sustainability, it may
get overcomplicated at that point.
(Mr Rintoul) There is definitely a partition, in some
of these areas that we are considering, between the direct operational
impacts and the policy, and there will be situations where it
is appropriate to brigade them together, and there will be situations
where it is appropriate and the only way you can access and understand
what is going on is to separate them, principally because of different
timescales over which the effects occur, or the impacts occur,
and how that data is captured. The other thing I would say is,
and I would concur completely with what Roger has just said about
potential timescales, the work that I have been doing with DETR,
which is now into its third year of reporting and it has published
its two reports, at the beginning of that, we developed together
a five-year strategy, so actually the reporting will not be really
where we want it to be for another three years.
124. So, just very quickly, a last question,
if I may, Chairman, because we are looking at the worldwide implications
of this, give me one country where they have legislated well to
do this, in terms of legislation for the private sector, and one
country where they audit themselves in their own Government Departments
(Ms MacGillivray) Sweden and The Netherlands and Denmark
are probably the furthest ahead.
(Mr Adams) I am sure the Danes have done it well,
I think they probably did it blind, not quite knowing what they
wanted, but they did not have the hang-ups about it.
(Ms MacGillivray) Sweden are still talking about it;
they have produced their sustainability indicators.
125. Sweden, The Netherlands and Denmark; and
are we talking about the public sector or the private sector?
(Ms MacGillivray) We have done some work recently
with the Danish Government, they are vexed by the question of
SMEs, and are now deciding that we do not start with the tool
that you want people to report on, you look at the motivation
and understand what actually will make them do what you want to
achieve, and if it is improving environmental performance then
maybe environmental reports are not the right way ahead for SMEs.
(Mr Adams) One of the problems is sometimes just language
is a barrier. I am always surprised by what comes out of Germany;
the Germans have got an environmental auditing standard for the
accounting profession, and have had one for the last three years,
no-one else in the world has got one but the Germans just went
away and wrote one. If you wanted to look at their Government
Departments, you would probably find there are a couple of orders
there somewhere requiring Government Departments to sign up to
EMAS, or something. I do not know. Public sector and environment,
I think, is a very unresearched animal.
(Ms MacGillivray) The Finnish are also using EMAS
as a means of reporting they are linking them to sustainability
126. Can I just come back to this question of
standardisation versus diversity, because I was not clear whether
there was a consensus emerging or not; and I suppose the issue
I want to raise is, is it not a question really of form versus
content, because I cannot see how you can argue that there cannot
be standardisation of content, because if there is not there is
no basis for comparison, and then the exercise becomes almost
meaningless? But I can see the point entirely that if the format
is standardised then it becomes routine and less intelligible.
So is not the issue really a degree of standardisation of content
but the encouragement of diversity of form?
(Dr Woollard) Can I have the first crack at that,
because we will come at it from different angles.
(Mr Rintoul) I think probably we will all agree on
(Dr Woollard) I am concerned about the sort of innovation
and creativity that I have seen in the last five years in environmental
reporting, and my major concern is that standardisation will just
stultify and make it even more boring than it is and make it just
not progress, it will set a sort of low benchmark and then everyone
will say, "Well, it's legislated, it has become standardised,
there's absolutely no competitive advantage in this subject, we
will make ten of these and submit them every year, and that's
it," it will just detract. There is probably a way that you
can do it, I am sure, in terms of just picking some key parameters
and saying every large publicly-quoted company has to report and
every large Government organisation has to report on these sets
of standards, and anything else is kind of up to you. My concern
is though, and, again, financial reporting is not my area, but
I do not know how innovative and creative and how sexy they have
become since having been regulated.
(Mr Adams) I think either you or Steve were talking
about different ways of putting the message into the market-place.
Financial reporting realised that people were not going to read
huge reports, and after privatisation we introduced by statutory
instrument the notion of the summary of financial statements,
which went to the smallest shareholder, GRI, as well as mandating,
if you like, a set of indicators for all companies, also suggesting
the executive summary, and the executive summary can be a stand-alone,
separately circulated issue, provided that somewhere in the background
there is this statutory core of information provided. All that
one would want to see, from a verification perspective, is no
inconsistency, if you like, between the instrument that is used
to communicate the information easily and directly and the detailed
information in the background. I think financial statement auditors
have already, in a sense, proved, with the summary of financial
statements and the full financials, that that is possible, and
I do not see a problem for it in the environmental reporting area.
So I think you can have your flexibility and your sexiness at
the same time as you can have a core of information which you
can just access from the web directly.
(Mr Rintoul) Just to complete, if there is any confusion.
I think what I was saying was, I would not advocate mandatory
reporting which was highly prescriptive as to the where, the when,
the how, the format, as well as significant rafts of content.
But I do also agree with Tom, that probably the fastest way to
get some change is actually to bring out some limited mandatory
requirements, and the balancing act to be struck is to get that
right so everyone can say, "Yes, we can see this is a sensible
thing, we can do this." It may well be, coming back to what
Roger said, you have got the analogy there that there is some
form of simplified report, whether it in some guises be called
an executive summary, or in some guises be called a public summary
statement, or whatever, which would be based on the mandatory
requirements; but anybody who has got any sense will always produce
the full report, based on their full systems and data behind that,
so it would allow the creativity and the communications activity
to be engaged with, which some of our clients do, and value being
able to do.
(Mr Adams) You have to remember, I think, that no
two companies, even if they are in the same sector, are necessarily
going to be subject to the same vulnerabilities that the gentleman
over there was talking about. Rio Tinto might be subject to one
particular set of very high profile attacks on its business by
NGOs and lobby groups, I do not know, BHP might not have the same
types of issues, it may have managed them differently in the past.
127. BHP, an Australian company?
(Mr Adams) Broken Hill Proprietary, yes. So you might
have companies that are very much in the same line of business,
with international spreads of operations, but some of them happen
to be in Burma and some of them are in North America, and the
pressures are different, and therefore the reporting issues are
different. So you can only mandate for so much, a core, because,
at the end of the day, the informed user, Amnesty International,
or Transparency International, or Greenpeace, are going to look
at that and say, "They've just done this minimum, and that's
not enough, they're not telling us the real issues." So you
have got to allow for that flexibility in there, I think.
(Ms MacGillivray) Also, if we are talking about standardising
for the UK, you have to recognise that a lot of these companies
are working in a lot of different jurisdictions and you have to
provide something that is flexible enough for them to be able
to produce a corporate report that makes sense. The sixth EAP,
(the sixth Environmental Action Plan)has identified now four rafts
of environmental action, and those might be suitable building-blocks
against which to report.
128. If I can just move on and talk to this
question of league tables, that you yourself referred to earlier,
because is it not inevitable that, in time, there is going to
be a kind of league table constructed, and there seem to be league
tables in every other area of social life but not necessarily
yet in company environmental reporting? And, tying it into the
question of how many people actually read or respond to these,
I would have thought that, even though fewer than 100 people may
respond to the Glaxo Wellcome report, for example, there are probably
hundreds and hundreds of NGOs and academics dotted around the
country and the world who are carefully scrutinising it, assimilating
that information, and will pull it out for their own purposes
at the appropriate time. So is there not an argument, therefore,
to establish this core minimum of indicators, and is it not inevitable
that these will be put into a league table, and people who have
got an interest in constructing these sorts of league tables are
(Mr Rintoul) Absolutely; even in Government Departments
we may move onto it more and more, but where there is available
data. I know officers, the staff of Government Departments, who
have been involved maybe in some energy efficiency programme,
or efficiency programme, that when some data comes out from another
Department, maybe for the first time, they will pick it up and
read it as eagerly as anybody else to see how they compare with
the other Department. So I think the staff of any organisation
will grab this information and look at it and say, "We're
doing better than X but not as well as Y."
129. Use it as a management tool?
(Mr Rintoul) Absolutely.
(Ms MacGillivray) The difficulty is finding the core
indicators or the core things that people can report on meaningfully
across different sectors, and how many has the Government come
up with; and everybody imagines that you can get half a dozen
core indicators that are really relevant, there probably are some,
but for the water sector it is leakage that people are really
(Dr Woollard) I do not think we are ever going to
get the core indicators right, I have to say, because the companies
I work for all have this spectrum, as you were saying, Roger,
a spectrum of issues, and actually perhaps that is best left to
the pressure groups and the connected on the Internet to find
out what those vulnerabilities are, because it will not be CO2
emissions, or air, water, waste, it will not be those kinds of
issues, it will be the health of your workforce in Africa, or
it will be child labour, it will be something that is not obvious
that actually poses a reputation risk, which will actually mean
that a private sector company will spend money on remedying, and
put things and systems in place to solve it. So, if you go into
the notion of having some core indicators, the question I would
pose to you is, who are these core indicators for, who is going
to make use of them, we have got all the FTSE 350 reporting on
the same five indicators, now who is going to on CO2, waste, energy,
air, what is going to be done with that information.
(Mr Adams) I could say one thing though. When you
go and talk to some of the analysts, particularly the financial
analysts, the European Federation of Financial Analysts do sit
and take apart eco-efficiency indicators, they are comparing different
steel companies and looking at throughput, they are looking at
waste, they are looking at these things in the same way as management
might, to try to say, "Well, from an investment perspective,
which of those would I prefer to go down." Whether or not
a core set of indicators, a small set, could ever satisfy those
people, they would prefer them to take on the full World Business
Council set of indicators, or something. But I think we should
not get confused. A small set of indicators may satisfy some of
Government's key policy issues, which may be about CO2 emissions,
or quality of bathing waters, I do not know, there might be some
key issues there that could be identified, but your league tables
are never going to depend on the core set of indicators. The league
table ranking is going to come from all these other triple bottom
line things that people add in on a voluntary basis; you do not
rank financial reports on the basis of what is mandated by the
Companies Act 1985, it is on the basis of the additional stuff
they put in.
(Mr Rintoul) I think it is a very interesting point
you are starting to expose there, Roger, in the sense that a core
data set, as tight as it can be made, does not necessarily have
to include the key issues for a particular company.
(Mr Adams) No.
(Mr Rintoul) What it is, this is a block that we are
mandated to report on, and we must not assume that we can get
all the key issues, or even the most significant key issues, for
a company in that core data set. You could actually have a very
large organisation where, in fact, the UK core data reporting
set does not actually map to or give any additional information
on the key issues, and their report addresses these other things,
which are more relevant to them. So I think we do have to be realistic,
but those that wish to report will always report on a much wider
set, and that is where the flexibility and the creativity come.
I agree with Tom, we have to decide who the set of indicators
are for, and it sounds like it might well be for Government, and
it is clearly stated in that way, and it is a way to encourage
the reporting disclosure.
130. Can I just move on a little bit, and ask
about the general quality of what you observed over the last year.
An underlying theme of what you have all said is that there has
been a steady improvement in range and diversity and quality as
well as quantity of reports, but what are the main weaknesses
that you observe in reports that could easily be rectified, or
with some effort be rectified?
(Mr Rintoul) I think one of the significant weaknesses
I encounter is how immature some of the systems are, and therefore
how short some of the time series of data are on which people
are trying to report and trying to make statements and trying
to draw conclusions; and it is just a maturity thing, the systems
and the experience and the confidence need to mature. So I would
say, as a general point, most of the weaknesses I see are through
this maturity issue, both organisationally and institutionally
and from a systems point of view. However, there are some specific
weaknesses, and I think this is a headache whichever sector you
are working in and in whichever organisation the client is, trying
to find meaningful metrics which allow you to present data in
an accessible way and yet are actually relevant to the business
at hand and mean something to business. I have seen people go
through academic hoops to try to work out metrics and you end
up with some sort of measure which actually has no relevance to
the business whatsoever, and it becomes then almost purely an
academic exercise, to say, "Here's the number X from this
year and here is the number Y from this year, and there's a Z
percentage change, but we don't know what it means."
(Mr Adams) I will mention two things. I think one,
for me, again, coming from an accounting background, is probably
just to do with some disclosure of the actual accounting policies,
measurement, rules used in the reporting, does one rebase for
significant changes in composition of the group this historical
data, recalculate it, and so on, so that you get appropriate trend
information. That is one area which I think still has room for
improvement. I think the other one, and my colleagues will probably
have a much better view on this than I do, is the notion that
you can present metrics which show improvement on an emissions
per unit, or energy, or whatever, sort of basis; at the end of
the day, the total environmental footprint of the organisation
is larger at the end of the year than it was at the beginning.
And if we are serious about sustainable development then very
few environmental reports, to me, show how well the organisation
is doing in reducing its overall environmental footprint. I get
a lot on eco-efficiency measures that tell me it is doing fantastic
things, but at the end of the year it is still using more energy,
it is still using more paper, it is still using more natural resources,
and turnover has gone up, so that, for me, is a problem that reporting
has not solved.
(Dr Woollard) If we are just talking about best reporters,
the top tier, who have their data management systems all sorted
out, then I would agree with Roger, it is something about interpretation
of the results, which links into that, which is, basically, you
have all these parameters and in any one year some of them go
up, some of them go down. Some of them go down because you were
lucky, because something happened, you saw the foresight, some
of them go up because you were unlucky, some of them you did very
well because something fell in your lap and it just worked out
well for you. I find in companies' reports they are not as honest
as I would like them to be, to actually give their commentary
on the results and say, "For this particular parameter, CO2
went down, and that is because we worked really hard at it and
we put a lot of programmes in place, and it came down purely as
a result of our strategy and our programmes; in waste it went
up, and it should have gone down because we put the same amount
of effort into that." That sort of honest commentary that
says, "This is what we predicted would happen, this is what
we wanted to happen and it did not happen," or "it did
happen," and also to be honest about those things that went
well because they had a bit of luck.
131. That brings me to another question, if
I could ask just one more, and this is to do with the balance
between the reporting of policy and reporting of operations; is
your observation that the majority of reports still are about
description of operations rather than an analysis of the policy?
(Dr Woollard) Yes; if you mean impact of the operations,
yes, it is about pollution issued from their operational activities,
it is not a discussion of their strategy, and if they implement
it over five years what the
132. They define environmental reporting as
pollution, essentially, polluting emissions?
(Mr Rintoul) The direct effects.
(Dr Woollard) It is performance related to their direct
impacts, it is not about saying how these parameters will go up,
or down, over the next five years if they implement the policy
as they would like to.
133. If I can give a concrete example. A company
in my constituency is British Polythene, it is closing its local
site and going to relocate in China; it is unlikely that there
will be an assessment in its annual report of the environmental
impact of relocating in China and re-importing polythene back
to these islands?
(Mr Adams) That is true of the environmental reporting,
as it stands at the moment. I think that the Global Reporting
Initiative guidelines on social discussions, and so on, would
be intended to pick up that type of point. There is a paper called
"Adding Values" that has just been issued by BT, written
by Chris Tuppen from BT and Simon Zadek, Chair of the Institute
of Social and Ethical Accountability, which is dealing with economic
indicators in sustainability reporting. The consequential knock-on
effects of a business decision are intended to be, in full sustainability
reporting, should be, brought to the surface. Similarly, a company
like, I think it was, Neste in Finland, or Novo Nordisk, in Denmark,
on outsourcing, has begun to say, "Yes, we are doing outsourcing,
and these are the standards that we are applying for outsourcing;
by outsourcing, we are not just trying to escape, let someone
else put in lower standards elsewhere, but actually we're going
to apply the same standards, we require that the contract will
stipulate the standards to be employed." But a lot of that
does not flow through environmental reporting at the moment.
134. Your reply just then to Mr Chaytor and
earlier discussion from the questions from Mr Keetch have prompted
a completely new track in my mind, really, and I would be very
interested in your comments. One of the things that we are trying
to do is look at possibilities for standardisation and how we
can incorporate this environmental reporting and systems and standardisation
across the board and across countries internationally. And I think
we are wanting, at the same time, to tie up opportunities for
employment competitiveness, if you like, through the environmental
agenda, at one and the same time. And, having just read the recommendations
of the Nuffield language report, it strikes me that this is a
whole agenda and a whole area where the very process of environmental
reporting has an implication as far as language is concerned,
because environmental reporting requires a very specific vocabulary,
and it is a very kind of specific process. And, given the trend
that there is towards more and more outsourcing and the global
economy that we are in, and this need to have some standardisation
internationally, and, given, if you like, although English is
an international language, concerns about lack of, or reduction
of, foreign languages being taught in this country, I just wonder
what role language itself and vocabulary itself and language experts,
foreign language experts, have in helping to address, with all
the multilateral environmental agreements that there are and the
greater need that there is for environmental reporting and standardisation
and assessment, how that is something which needs to be addressed
through specific language training as well? It is a bit of a tangle,
but it just strikes me that that is something which in the long
term we will need to have to be looking at, in some way.
(Mr Rintoul) Two comments there, which are really
from the hip. If you are looking purely at language superficially
then the way that we have dealt with that in the past is, and
I will have to be completely honest and be Anglo-centric, or British-centric,
the core of the report has been in English and we have had executive
summaries in a range of languages which have been appropriate
to the principal audiences for it. But I think what I see is more
underlying this is languages by manifestation of different cultures,
and it is not just the language issue, it is actually the underlying,
the fundamental cultural differences which are important to recognise,
acknowledge, address, value and celebrate, in some situations.
And I am not saying it will not happen, but if you were to pose
a question to me, as was posed earlier, when you gave me two good
examples and gave me two bad examples, I do not think there are
any examples at the moment, and therefore it is actually quite
Anglo-centric, Euro-centric, rather than in the certainly international
and global operators recognising and acknowledging all the cultural
diversity that might be represented in organisations. These are
early moves, but, I would have to say, generally, that is the
sort of response I would make to it.
(Mr Adams) I think one of the problems we encountered
at a Steering Committee meeting of the Global Reporting Initiative
was when we looked for, we were saying, information should be
available to stakeholders, and we had major problems with particularly
the Colombian Business Council for Sustainable Development, because
the notion of availability or accessibility implied, when going
(a) through Spanish and (b) through the cultural loop, that we
were mandating companies to make this information at certain times,
or whatever. And that was not the issue, we were talking in a
much more general conceptual way about the accessibility or transparency
of information. There are a number of companies that do produce,
BP, again, produces a range of reports worldwide, in different
languages, there are a number of multinationals who report at
the consolidated level, in different languages, GRI itself is
in three or four languages at the moment, including Japanese and
Spanish, Dutch, German, I think. I think the language issues are
beginning to be recognised by standard-setters, you need only
look to the International Accounting Standards Committee and the
fact that it has taken them 15 to 20 years to get to a stage of
approved translation of international accounting standards into,
if you like, the UN family of languages, that it has taken them
a long while to get there.
(Dr Woollard) Interestingly, Philip Morris, the American
tobacco company, published their last year's environmental report
in 15 different languages.
(Ms MacGillivray) The web can make it much easier
to do that though. I think it is much easier to produce a web
page in another language.
135. To what extent do you see standardisation
of reporting and reporting on a number of key measures as a threat
to your interests, as consultants and advisers to companies?
(Dr Woollard) As a consultant, I think it would be
delightful, we would get a lot more work if you standardised reporting;
it would only be to our benefit, actually, as those who live off
136. So you have been advising against your
interests over the last hour or so then?
(Dr Woollard) Yes, I have, I guess.
137. That is a rare thing.
(Mr Rintoul) I would have to broadly agree with that,
because, the client organisations that we have, that we do significant
reporting projects for, and carry on reporting, because they are
by and large committed on a certain path, and if there is some
form or some level of mandatory disclosure and reporting, we will
pick up more clients because of that, I suspect.
(Dr Woollard) On this web survey, only 25 of the FTSE
100 produced any environmental performance data on their websites;
so there are 75 FTSE 100 companies who, presumably, would be searching
around for help and support in collecting performance data and
putting it on their website. So it would benefit the consultancy
and support services industry.
138. In earlier questions, we have tried to
explore what international comparisons there are, and, how is
it working in Denmark, and so on, you have answered, "We
don't know," really. Can we look at how does it work on the
individual company? We have got these examples of companies of
best practice over most of the last decade, are there authoritative
reports that say, "Well, this is BP, this is what environmental
reporting has done to BP, has done to its environmental footprint,
which would not have happened without that sort of reporting;
this is its effect"?
(Mr Adams) I am not sure of anything historically;
we are currently doing something on Anglian Water, with a consulting
firm as the co-researchers, looking at environmental footprinting
at the corporate level. For many of the companies, I think their
reports themselves certainly indicate clear, sometimes massive,
reductions in certain parameters; but whether those have been
gathered together, as you suggested, in an authoritative report,
I am not sure.
(Dr Woollard) It is a really good question. Almost
all the clients I work for could list straightaway the benefits
of reporting internally, better co-ordination of data, using the
same units, even better reporting of non-misses; but also performance,
it has driven performance, in some cases, because sites of a multi-site
operation will say, "Well, all the other sites in this company
can report, we can't, we need to develop a management system."
So there is a whole load of benefits. But we have never attempted
to go back to those companies and say, "Let's just pick them
all up, take 20 companies and pick up all of those benefits, both
in terms of internal communication, in terms of improved management
and better overall performance." But it is something that
you could do quite easily, actually.
(Ms MacGillivray) There is a WRI report on the financial
benefits of improved environmental performance in companies, but
not necessarily associated with reporting; the World Resources
Institute, in Washington.
(Mr Rintoul) That is the point I would make. I think
the improvement comes from the better management, the better knowledge,
not from reporting, but reporting drives the need of organisations
to get better management and to get better performance.
139. But is there not some documentation or
somebody that might have looked at, "Well, here's a company
in this sector which has introduced environmental reporting, here's
another company which didn't introduce it, within the same sector,
broadly comparable companies, one is operating environmental reporting
and the other one is not; we'll have a look at their progress
over five years"? What is the difference?
(Mr Adams) What sort of progress?