Examination of Witnesses (Questions 140
THURSDAY 8 JUNE 2000
140. Are you saying there is no difference?
(Mr Adams) No. A finance researcher can easily take
a sample of companies that have got environmental management systems
and environmental reports and match them with companies that do
not, and then compare their share price, their cash flow, that
type of information, because that information is in the public
domain. But you cannot take a company that has got environmental
reporting and compare it, necessarily, with parameters, with a
company that has not got environmental reporting, because, by
implication, where the company has not got the parameters, so
you would never find out. But the tension that was implicit in
this thing about have companies been proved over time, it goes
back to my earlier point, and certainly my colleagues here could
look at all their clients and list 10, 20, 30 parameters, waste
discharges, air quality, whatever, where they have improved; if
you took their overall environmental footprint over that ten years,
or five-year period, where they have doubled their turnover perhaps,
they have gone through growth by takeover, at the end of the day,
that company will probably be a bigger polluter than it was five
141. Who should be responsible to verify the
report, to say that, "This bit of the report is complete
window-dressing, it means nothing at all, but this statistic is
important," if it is produced by that; who verifies the report,
or who should?
(Mr Adams) In the absence of mandatory reporting,
every verification engagement that is undertaken is what we would
call a bespoke, or it is a one-off; the terms of reference for
the engagement are agreed between the verifier and the management.
142. Who is the verifier?
(Mr Adams) The verifier might be Aspinwall, ERM, Ernst
& Young, KPMG.
143. The company that is employed by the ...
(Mr Adams) Normally, an independent organisation employed
specifically for providing an opinion on some aspect of the environmental
report; and I have to couch it in those terms simply because,
again, in financial statement auditing you have got a Companies
Act that prescribes the form and content of the reports and prescribes
what the financial auditor must report on, the three major, four
major issues they must report on. There is nothing of that nature
in existence in environmental reporting, and therefore every engagement
is unique; therefore, the terms of reference, I will have to leave
that to you how the terms of reference for an engagement are sorted
(Dr Woollard) The verifiers are completely unregulated,
anyone can do a verification of a company, if the company pays
them, or sometimes when the company does not.
144. How can the public or any other stakeholder
get any degree of credibility in the report which is not verified?
(Mr Rintoul) The organisation that is doing the verifying,
their track record for doing verifying; that is number one. I
think that should give a level of assurance. And also, I have
to agree with Roger completely, there is no sort of standardised
or mandatory way of doing it, but there are common themes; and
in the verification statement, when you open the verification
statement, ourselves and ERM as well, we would state which system
elements were the boundary which has been verified and audited,
and using which broad techniques. So it comes down really to the
verifier, in some appropriate way, indicating in the report the
level of detail and the breadth of the verification audit; however,
having said that, there is considerable scope for abuse. I have
seen verification statements from people, organisations, that
say little more than, "This is a sound report," with
no indication of the level of detail, whether they looked at data,
systems, commitments, and so on and so forth, whether it sampled,
100 per cent audited, or whatever.
145. Mr Rintoul, you have got some experience
obviously of verifying Government Departments; what did you find
(Mr Rintoul) In what sense, because it is a very open
146. Where were the weaknesses?
(Mr Rintoul) The weaknesses, without a shadow of a
doubt, the immediate weaknesses, were the absence of data on which
to make judgements, form opinions.
147. Is this the maturity point you are making?
(Mr Rintoul) It is the maturity point, but also the
absence, in some instances, of any data.
148. At all?
(Mr Rintoul) At all; yes. I suspect the level of what
I would call environmental sustainable literacy, and understanding
of what sustainable management and development is, is maybe at
the same level in most Government Departments, and most parts
of Government Departments, as where financial management was ten
or 15 years ago; it is a grave concern but something which can
be rectified. So I would say that the absence of data, and certainly
the absence of robust trend data, and then when you look a bit
closer and you look at the systems you also see, basically, the
reason why there is an absence of data is there is an absence
of systems; this data is just not routinely looked at, for any
reason, and it is just symptomatic of, it is not managed.
149. That is the point I wanted to come to,
because you have emphasised the point that what appears externally
is merely a reflection of what is done internally, and it is the
internal thing which really matters. The fact that the Government
is so poor, by comparison with the private sector, on its external
reporting surely implies that what is done internally, it is not
environmental because it is really not integrated, or environmental
audit is not integrated into the whole system of Government policy-making?
(Mr Rintoul) From a general point of view, making
a general point, I would have to agree. There are signs that that
is changing, in all Departments, and more so in some Departments
150. But, as a general statement, that is true?
(Mr Rintoul) As a general statement. That is also
why, I will go back to a comment I made earlier that, even with
DETR, which must be seen as one of the most important Departments
in this whole debate, when we sat down with them and worked out
about reporting, and so on and so forth, we actually said to them,
"There's a five-year strategy here for you, you're not going
to do it all in year one," because that five years is required
to build the underlying systems, get the confidence, the experience,
the data flows, the trends, take out some of these instances where
you get an opportunistic gain one year, because you disposed of
200 buildings from your estate, and next year you have acquired
a few more, so it changes. And it is going to take that sort of
time frame. And there are a lot of developments going on. Now
that is not to say that within the people that are now attempting
and managing these types of impacts and activities there is not
the understanding of what they are doing and why they are trying
to do it, and they are equally hamstrung by the absence of the
underlying systems as well. But, I have to say, it is almost a
generic failure, or mismanagement.
151. The other problem is cost, is it not, because
it is significant resources that have got to be put into this?
(Mr Rintoul) I would say, yes, there are obviously
cost issues, but I would say, if these are streams of activity
or resources on which funds are being paid out, public funds,
whether it is energy, whether it is waste disposal, whatever,
there is a cost associated with those anyway, and, if you do not
manage it, how do you know whether the cost is being well spent
or poorly spent.
152. So what you are saying is that they are
spending the money anyway, something like £500 million to
subsidise a new jumbo-jet for Europe; if they would put 1 per
cent of that into finding out whether there was a proper environmental
appraisal it would make some sense?
(Ms MacGillivray) Yes; and a lot of these things are
part of best value which you are asking Departments to report
(Mr Rintoul) I cannot understand how you can have
somebody, and I am not thinking of any one person or any one Department
here, I must actually say that, I cannot understand how any person
sitting there, part of whose job description is to be the departmental
energy manager, or have some involvement in waste management,
and not understand the cost of doing it. And the cost of his job
is to manage that, it is not an additional cost to collect the
information, he needs that information to do his job, surely.
153. Chairman, could I ask about this concept
of environmental literacy, which I think is extremely interesting,
and just ask specifically how do you think that can best be developed
both within Government Departments and within the corporate sector
as well; is there some example of good practice, of companies
that have particularly committed themselves to programmes of environmental
(Mr Rintoul) It has not been committed to a programme,
if you like, an overt programme of environmental literacy. On
Monday of this week, I was working with Reckitt Benckiser, Benckiser,
which is a German company, has merged with the old Reckitt and
Colman, it is now Reckitt Benckiser; and they have actually, as
part of their staff development and training programme, so it
is part of a wider programme, they actually train a large percentage
of their staff in the principles of auditing, whether it is process
auditing, environmental auditing, safety auditing, whatever, and
they have a culture there where people audit each other. Now,
as part of that training programme, which is built round the principle
of auditing, there is a great building of environmental literacy,
process literacy, financial management literacy, as well. I see
companies like that, and I just think of that one because it is
the one I have most recently been into, so they are building these
competencies in their staff for business benefit, but it is not
specifically saying environmental literacy, necessarily.
154. No, I understand that; but is that a model
that could easily be transferred to Government Departments or
(Mr Rintoul) I would hope so.
155. I was just wondering about the question
of international accountability and verification, and not so much
the point that Joan Walley raised earlier about language but about
the cultural filters that come on this, and I wonder if you have
any views on, particularly in the private sector, with international
conglomerates, how they report differently, if you like, through
those cultural filters to different countries? And one example
which came to mind would be perhaps a company in Canada, a pesticide
company in Canada, say, which we saw a few weeks ago, being able
to report perhaps some significant improvements on their environmental
performance because of the use of GM crops; and that would not
be an appropriate way to report in this country, I would suggest.
So where do you pick the international standard there about the
reality of what has been set, how much of this is objective, how
much of this is subjective, and how much can international standards
really pin this down to what the footprint part of it is and what
that company has left behind, or has changed an environment, when
it moves on from year to year?
(Dr Woollard) Just one point about language, and it
does not deal with your question in its entirety, I am afraid,
but I am noticing a trend of companies like Rio Tinto and Tetra
Pak who say, "We can't encapsulate this all in one global
report that we send out, we have different reports for different
countries." Rio Tinto, I think, has 15 local, either regional
or country-specific reports, just because of the languages and
the understanding of the issues, and what people are interested
in varies so enormously.
156. The understanding, is that environmental
(Dr Woollard) Yes, and it is cultural differences
in what they are interested in, what they want to report on, so
Rio Tinto has 15 different reports, Tetra Pak has a whole load
of different reports for different countries, and they feel that
that is the most appropriate way to respond to the diverse audience
they have got.
157. Can I just ask if those different reports
have the same standards?
(Dr Woollard) No. Interestingly, they are often not
terribly well controlled, but I think that is quite a good thing
as well; if they were all the same then they would just be back
to the one report. It is actually quite good, from an internal
operation standpoint, that they feel, parts of their organisation
feel, perfectly knowledgeable to prepare their own report, and,
I think, in many ways, they ought to be praised for doing that,
because a small part of the operation can actually put together
its own report and put it out to that region. Now if someone wants
to criticise that company they can do it quite easily by saying
there is not consistency between the different reports and a core
report, but I think that is slightly unfair.
(Mr Adams) I think you can look at it from that perspective,
but you can also look at something like the Shell experience in
the last five years, where, whereas, in a sense, Body Shop was
born with values, Shell had values thrust upon it, and you cannot
read a page of the Shell report without understanding its values.
Now it is perfectly fine for companies to report, to recognise
the culturally different contexts within which they operate, which
might have something, it might be reporting very heavily on gender
issues at the management level in its European companies, but
not so much in its operations in the Gulf, or something, or in
Pakistan, I would be happy to see those cultural differences reflected
in the reports, provided that there is a continuing acknowledgement
of values throughout. If a multinational corporation does not
have a single, global set of values and a strategy or vision approach
then I think it is unlikely to maximise its earnings for shareholders,
let alone do any of these other things properly. So, I think,
again, it is one of these tensions where values versus cultural
diversity has to be juggled.
158. You have talked about the difference between
the public sector and the private sector; thinking now of the
public sector specifically, how do you see, in your view and your
experience, environmental audit and environmental accountability
developing within the public sector, from the position which Mr
Rintoul in particular was just commenting on, how do you see that
developing in the next few years?
(Dr Woollard) The reporting and the development of
management systems and the development of literacy I see as all
part of the same sort of thing. It is quite easy now to look at
reports and very easily tell what sort of company this is; from
my perspective, I can look at these reports and I can really tell
what sort of management system they have got, what sort of culture,
how long it has been going, probably how much they have spent
on their reporting, and how far down the road they are to developing
the really strong systems, because they just show through increasingly
in what they can report, because some companies can report so
much. So I see them all as being very tightly connected. My small
thought for Government is that I do not think you can push too
hard in any one area; if you suddenly say, "We're going to
produce state of the art reports," but you have not actually
got the basic environmental literacy or understanding of what
the issues are then you are running before you can walk. So, I
think, the experience of the companies I work for is that the
first report is a rather thin, rather glossy, rather anecdote-full,
kind of brochure-like output, but over the years they gradually
get better, they gradually start putting more data in because
they can, and their systems start to get certified, and then people
become more knowledgeable and they start leading in certain areas
and their report gets better and better. I have spoken too long;
but my short reply is that I think you need to work in all of
those areas and recognise that getting a very simple, maybe not
very full of data type report out there will just reflect honestly
the stage you are at, of just understanding the issues.
159. But, given what you said about judging
the personality, if you like, of the company, from the report,
you do not get any similar thing in the public sector, you are
not able to judge the personality of the DTI or the DETR?
(Ms MacGillivray) I think the drivers in the public
sector are rather different, and we feel that sustainability is
a driver and something the public sector is interested in, and
talking about developing sustainability strategies. It does not
really mean anything to private sector clients, who are doing
this for different reasons that we have already talked about.
And I feel really that developing a sustainability strategy and
then the systems to implement that, and the reports to report
against, it is part of the process and really the rationale for
doing it, rather than reporting on green housekeeping and how
well we manage our buildings, and so on. That will give the framework
for reporting about wider impacts and indirect impacts of policies,
and so on, and would make it rather more interesting and relevant
to those that might pick up the report and show the character
of Departments and what they are doing, rather than energy efficiency.
(Mr Rintoul) I think, to come back to, again, the
question of saying what do the reports tell us about the character
of a Department, I think the sample is too small, that is number
one, we have not got enough things to compare it against over
a long enough time, and that speaks volumes in itself. I would
also agree with everything that Anna and Tom said, that some of
these conclusions we can draw from the private sector is because
we have got five, ten years' experience of it, and there is just
not that length of experience in the public sector yet.