14 January 2020

Tortoise Intelligence

Responsibility100 Index

Good companies need to be good citizens too – it’s time for action

By Alexandra Mousavizadeh, Ella Hollowood and Alexi Mostrous

Britain’s biggest companies are producing more greenhouse gas emissions than the whole of the UK put together, a new analysis of corporate responsibility reveals.

The data also exposes how almost a third of FTSE 100 companies increased their carbon emissions last year despite the critical threat posed by climate change.

The findings form part of Tortoise Intelligence’s Responsibility100 Index which is officially released today.

Using over 10,000 data points from more than 200 publicly available sources, the Index ranks FTSE 100 companies by their commitment to the United Nations’ 17 Sustainable Development Goals, which were introduced in 2015 “to achieve a better future for all” by 2030.

It also measures the gap between what companies say and what they do on corporate responsibility – talk versus the walk – highlighting the range of corporate commitment to people and the planet.

This week Tortoise is taking a close look at different solutions to the climate emergency, ranging from planting millions more trees to placing a levy on greenhouse gas emissions. You can read the first piece in the series, from Giles Whittell, here.

The Index’s key findings include:

Unilever is the FTSE 100’s most responsible company. Despite being one of the biggest emitters and plastics producers on the Index, since 2016 it has cut manufacturing emissions by 18.8 percent and performs well across the board on other key factors, including gender equality.

Tesco is the top supermarket. It has a rigorous approach to its responsibility reporting, backed up by strong action on staff training, tackling poverty and delivering the best record on emissions of all the supermarkets. Morrisons has the worst ranking in the sector.

–  easyJet, which returned to the FTSE in December, is the worst-performing airline after its emissions increased from 7.6 million tonnes in 2018 to 8.2 million tonnes in 2019. easyJet is only two positions below International Airlines Group, the other airline group in the FTSE, which owns British Airways.

Melrose Industries, which buys and improves other businesses, stands out for its lack of transparency: it failed to report on over two-thirds of the data points we were looking at and stayed silent on areas such as employee diversity, training and wellbeing.

Lloyds is the best performing bank having been awarded an “A” grade by CDP Worldwide, the charity for climate performance. Lloyds rated less impressively on other indicators, such as gender equality. Royal Bank of Scotland was the worst performing bank overall.

Tortoise Intelligence first released the Responsibility100 Index in September in Beta format. Since then we’ve spoken to representatives at more than 70 of the FTSE 100 companies to refine the methodology and strengthen its findings by adding further data points.

The updated Index has remained structurally consistent but has seen some changes since September. Auto Trader, the automotive advertising business, rose from 96th position to 27th place, for instance, thanks mostly to inclusion of data relating to employee wellbeing and satisfaction, both areas where the company scores highly.

“While there are some good performers in the FTSE 100, this Index shows there is a huge disparity between what Britain’s biggest companies say they will do and what actually happens,” Lord Malloch Brown, former Deputy Secretary General of the UN, told us.

“Time is running out to fix these issues. This is a call to action to improve corporate behaviour.”

The data behind the Index also exposes a worrying shortfall in corporate responsibility in the FTSE 100 as a whole.

It reveals:

– 3.1 million FTSE 100 employees work for companies which have not committed to paying them a UK Living Wage of £9.30 an hour;

– 419 million tonnes of CO₂ equivalent was released by FTSE 100 companies last year, 55 million tonnes more than produced by the entire United Kingdom;

– For every £1,000 earned, the average FTSE 100 company spends just £1.39 on charity or community projects. Of all the FTSE 100, the broadcaster ITV is the most generous, donating £13.94 for every £1,000 of their revenue.

Many FTSE 100 companies are not divulging sufficient data on responsibility, the Index finds. Not one of Britain’s biggest companies reports on LGBT representation at a senior management level, for example.

Only five companies report on food waste; only nine track whether materials they use come from responsible sources; only 19 report on the ethnic diversity of their workforce and fewer than half report on how much waste they recycle.

Apart from Melrose, opaque companies include Aveva, RSA Insurance Group and DCC PLC. All failed to report on more than a third of all indicators we examined.

Here are the best and worst performers in the FTSE broken down by sector.

The supermarkets

The four FTSE supermarkets have a combined workforce made up of more than half a million people.

Yet none are accredited with the Living Wage Foundation, which obliges participants to pay workers over the age of 25 a minimum of £9.30 an hour and £10.75 an hour in London. They also feature relatively highly in UK employment tribunal cases. FTSE 100 companies been involved in around 1,100 employment tribunal cases since 2017 and the supermarkets featured in over one third of those, with Tesco alone being taken to tribunal over 200 times.

Tesco, Sainsbury’s, Morrisons and Ocado together produced 96.6 million kilos of food waste last year. But this is just the tip of the iceberg. A large part of the supermarket sector’s waste impact comes from lower down in their supply chain. In 2018, 27 of Tesco’s major own-label suppliers revealed they wasted 680.8 million kilos of food, compared with the 53.1 million kilos Tesco reported had been wasted from its UK operations in the same period.

The banks

Britain’s biggest banks earned profits of £32.7 billion before tax last year, a figure second only to the FTSE100’s energy companies. Their deep pockets are reflected in the sector’s high levels of philanthropy. Employees of the FTSE100’s 16 banking and other financial services companies volunteered more than two and half times more hours to charities than the rest of the FTSE100 combined.

But the banks have behaved badly too, from misleading investors to manipulating currency markets. RBS alone paid out £8.6 billion in fines since 2016 – almost half the value of all financial penalties imposed on FTSE 100 companies in that time – and, as a whole, the sector faced payouts to regulators and settlements of £12.7 billion.

Gender representation is also a weak point. For every woman appointed to a FTSE 100 bank’s board of directors since 2016, three men were also appointed.

Oil, energy and mining

Seven of the FTSE 100’s top 10 climate polluters extract oil, gas and minerals. They also use a lot of water. Over the course of 2018, the FTSE 100’s mining giants used 381 billion cubic metres of water – enough to fill 153 million Olympic-size swimming pools. And though the sector reported to have recycled or reused 66 percent of this water, the remaining 34 percent of wastage is more than four times the amount of water used by the entire rest of the FTSE 100.

Fashion

Two of the FTSE 100 fashion companies have chosen to stay quiet on their environmental record. Between Burberry, JD Sports and Next, it is only the latter who reports – and performs well on – issues such as wastage, water consumption and recycling.

Next could do better at promoting its female employees though – while women make up 68 percent of the company’s total workforce, they hold just 32 percent of senior management positions.

Big pharma

Two of the pharmaceutical companies make the top 10, with AstraZeneca beating GlaxoSmithKline on climate: it has a higher proportion of waste recycled (46 percent vs 23 percent), lower levels of water consumption (4m cubic metres vs 12.9m) and lower carbon emissions.

The sector is strong on research and development – last year, Big pharma spent £10 billion on R&D, the highest of any sector.

Travel

The travel industry – and in particular the airlines – unsurprisingly have an emissions problem, with a high level of emissions per employee. Compared to the FTSE average of 83 tonnes of carbon dioxide equivalent emissions per employee per year, Easyjet emits 603 tonnes of carbon per employee and the International Airlines Group emit 466 tonnes per employee.

For more detail on the Index, including a full methodology, please visit https://www.tortoisemedia.com/intelligence

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Further reading

TORTOISE INTELLIGENCE

Led by Alexandra Mousavizadeh, who has more than 20 years’ experience in ratings and indices, Tortoise Intelligence brings together data scientists, data journalists and researchers with wide experience in data analysis. Team Members: Alexandra Mousavizadeh, Director of Tortoise Intelligence; Alex Clark, data journalist; Andrew Haynes, data scientist; and Luke Gbedemah, researcher