Developing Environmental Key Performance Indicators for UK Companies

- By:

Courtesy of Trucost Plc

Untitled Document

The Operating and Financial Review (OFR) will apply to all UK listed companies for financial years beginning in 2005 onwards. The OFR will require the Directors to provide shareholders with an overview of the business in order that they can 'assess the strategies adopted... and the potential for those strategies to succeed.' Although Directors will have the discretion to decide whether or not to include environmental matters within the OFR, the process employed to make this decision will be subject to independent auditor review.

The Accounting Standards Board will set the standards for reporting and it is generally acknowledged that if these standards were to include guidance on appropriate non-financial KPIs then the resulting information is more likely to be consistent, comprehensive and would allow shareholders to make comparisons both over time and between companies. This Special Report aims to describe a common method by which companies can determine relevant Key Performance Indicators (KPIs) for the environmental component of their OFR.

Key findings:

  • 86% of companies would have to report on a maximum of 4 KPIs
  • 97% of companies would have to report on less than 10 KPIs
  • 331 companies (of 551 in the FTSE All Share) have environmental impacts totalling more than 1% of turnover or USD1million, whichever is lower
  • 26 KPIs would cover the significant environmental impacts of every company in the FTSE All Share Index and the maximum number any individual company need report on is 17


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