The 6th BiE Index

Business in the Environment's 6th Index of Corporate Environmental Engagement ('the BiE Index') was published on 26th February. This year for the first time participating companies were asked to report on the most significant areas of environmental impact to their operations and sector, enabling investors and analysts to compare environmental performance between companies within the different sectors.

Eight companies in the Financials economic group chose 'indirect' impact, representing 27% of the companies in their four sectors (Banks, Insurance, Life Assurance and Speciality & Other Finance). Derek Higgs, Special Adviser in the UK to UBS Warburg and Chairman of BiE, comments: 'These leaders have thrown down the gauntlet. The challenge for their peers is how quickly they pick it up.'

The finding complements research conducted for BiE by City University Business School, published in February 2002, which suggested that a high placing in the BiE Index could be related to less volatile share price and hence lower cost of capital.

The lack of indicators specific to individual sectors was revealed in BiE's report 'Investing in the Future' (published in May 2001) as a key factor preventing the City from giving environmental performance higher priority when judging companies. The report indicated that City analysts and fund managers seek integrated, comparable evaluation of companies' corporate responsibility and quality of management to reduce risks and deliver performance. The development of a Corporate Responsibility Index by Business in the Community, building on the experience and engagement in the BiE Index, will go some way to providing a basis for such evaluation.

For the first time also in this year's BiE Index, companies which could show an actual improvement in performance over periods of up to five years were rewarded. Derek Higgs explains: 'This year's Index is more than a benchmark: it is a snapshot of what is happening in global corporations in terms of environmental performance. Scoring companies on whether or not their performance is improving is a further check on the value of the BiE Index to investors as well as to environmental bodies.'

The introduction of an electronic survey developed for BiE by Arthur D Little this year enabled global corporations speedily to obtain accurate information from global business units for incorporation into their returns.

Highest new entrants and highest climbers

In addition to Lattice, which comes straight in to joint first place along with IBM and Scottish Power, other highest new entrants are: Jaguar, Innogy Holdings, Volkswagen and GlaxoSmithKline. Dow Chemical is not only a new entrant but also achieves first place in the Chemicals sector. Ford Motor Company is hard on the heels of Jaguar and Volkswagen, and Pfizer is hard on the heels of GSK as high new entrants. Manchester United is the first football club to enter the environment league. Marks & Spencer is the biggest upward mover in the Index - up 94 places to 14th.

The Software & Computer Services sector, placed bottom in last year's 5th Index for both participation and score, achieved the biggest increase in participation rate, up from 7% to 23%. The sector's score is currently second lowest at 37%, but up from 11% last year, and good scores for Leadership and Policy suggest further improvement in years to come. BiE's approach to this sector is now informed by the presence in its leadership team of Kevin Lomax, Chairman of Misys.

Performance on Global Warming, together with Energy and Transport, has improved, from an average of 60% to 65%. Even so, 45 companies (22% of participants) are still not setting any targets at all, and 1 in 4 is unable to show any improvement over the past year or longer. Moreover, only 57 companies have verified and auditable data on their Global Warming or Energy and Transport impact. The ability to measure emissions, set targets for improvement and assure the reliability of statistics will be essential for companies participating in Emissions Trading schemes or subject to the UK's Climate Change Levy.

Supply chain management remains a major headache for most companies. At 53%, the average score was the lowest of all in the Management section. Low scoring sectors include Chemicals and Steel - both with high potential risk factors in this area.

To help companies share best practice and address the challenges of integrating environmental issues into supply chain management, BiE will be running a business conference in June 2002 'Buying into Sustainability'

Benchmarking advisory services

Companies can now elect to benchmark their performance within their sector on a confidential basis, against "best in class" companies, or comparing business units or suppliers worldwide and how they measure against their internal or external peer groups. Using the methodology and experience gained from six years of publishing the BiE Index, the BiE team can help companies to identify areas of strength, weakness and gaps in both strategy and practices. These benchmarking services provide boards with a unique insight into their company's performance. Using the shortlist of actions and priorities provided the company can develop strategies to improve performance and communicate goals. Regular use of benchmarking can provide continuous assessment of performance. Companies who have already used Business in the Environment's advisory services include Reckitt Benckiser, Diageo, RMC Group and TXU.

Copies of the 6th BiE Index report, which provides indepth sector and company analysys as well as the overall rakings are available from priced £75

Business in the Environment is a Business in the Community Campaign.
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