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Major companies’ annual reports too vague about climate impact

11 July 2019
Dick de Waard

Many major Dutch companies publish extensive information about climate impact in their annual reports. However, very few companies provide concrete, detailed information about their own CO2 emissions, the impact of climate change on their business operations and their future plans to limit this impact. This is according to research carried out by Dick de Waard, Professor of Auditing at the University of Groningen. De Waard was commissioned by the PBL Netherlands Environmental Assessment Agency (Planbureau voor de Leefomgeving) to analyse the 2016 and 2017 annual reports of 199 companies.

‘The climate reports of these major companies contained general explanations relating to corporate governance, reporting criteria, and strategy and policy. But on the whole, there was no adequate plan-do-check-act cycle with regard to CO2 emissions, making it impossible for these companies to report any concrete figures,’ concludes De Waard.

Missed opportunity

The EU Directive introduced in 2017, which compels public-interest organizations to publish information about sustainability in their annual reports, has done little to change this situation. According to De Waard, this is a missed opportunity. ‘We all clap our hands in glee at the climate agreement made in Paris and the presentation of our own Dutch climate agreement. But we need concrete figures to evaluate whether we are meeting these goals. And solid figures are sadly lacking in our business sector.’

Three-way split among listed companies

De Waard studied the ways that various companies kept track of their climate impact and the effect of climate change on their business activities. One of the main aims was to see whether there was any change in the information provided between 2016 and 2017, when the EU Transparency Directive (2014-95) came into effect. De Waard noted huge discrepancies in the amount of detail and depth in the information and subjects reported by the various companies. ‘There’s a three-way split in the quality of the information provided by listed companies, where the AEx funds are generally more transparent than the AMx funds, which in turn are more transparent than the ASCx funds.’

Unlisted companies

Private unlisted companies are significantly less transparent. Only 20 to 26 of the 96 unlisted companies studied provided any kind of serious information about the impact on, and of, climate change. Even then, a few of them only gave very scant details. At present, although these companies fall outside the formal scope of the Transparency Directive, they do form an important part of the Dutch business sector. They too will be affected by climate change and the climate agreement. De Waard: ‘I had thought that the introduction of the Transparency Directive would have a positive effect, including on these companies. But we were unable to ascertain any such effect in our research.’

Research design

De Waard and his colleagues studied 25 listed companies per index (AEx, AMx and ASCx), to evaluate their transparency and the expectation that regulations on transparency would change their practices. The EU Transparency Directive applies to companies with a minimum of 500 employees, a balance sheet total of at least € 20 million and a turnover of at least € 40 million. In addition, the researchers selected 96 companies from the Elsevier Top100 list of private companies, including major family businesses. A group of 29 major organizations from the Ministry of Economic Affairs & Climate Transparency Benchmark was also added to the sample. The representative sample therefore consisted of 199 organizations. This group gives a good impression of the degree of transparency regarding climate impact in the external reports published by major Dutch organizations for 2016 and 2017.

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