Guidance to help firms demonstrate their sustainability credentials through improved environmental disclosure was published for consultation by the environment department (DEFRA) on 25 July.

The voluntary guidance shows how companies can measure and report their environmental performance using key performance indicators (KPIs). Five areas of environmental performance are covered: water, waste, natural minerals, air quality and emissions, and biodiversity and ecosystem services. Advice is also given on how to report biodiversity offsetting.

It is compatible with international reporting standards, such as Global Reporting Initiative rules, and the government’s 2009 reporting guidance for greenhouse gases (ENDS Report, June 2009). Biodiversity impact measurements are based on Convention on Biological Diversity indicators.

DEFRA is also encouraging companies to produce integrated reports combining information on environmental impacts with results on financial performance and social issues.

The guidance updates DEFRA’s 2006 environmental reporting guide covering resource use and emissions to air, water and land (ENDS Report, July 2005). Advice on measuring and reporting impacts on wildlife and natural services, such as clean air, clean water, food, timber and flood protection, is the main change found in the update.

The publication fulfils a promise in the 2011 natural environment white paper to issue new green reporting guidance for business this year. DEFRA says its new advice also builds on calls at the Rio +20 conference, led by UK financial services company Aviva, for large companies to report their environmental performance annually (ENDS Report, May 2012).

DEFRA’s 2006 guidance aimed to help quoted companies meet a Companies Act obligation to report on the environment in their annual business reviews. But to date, these have been slow to follow this voluntary advice.

Although 67% of FTSE-listed companies disclosed quantitative environmental information in 2009/10, using at least one KPI, only 28% used the government’s reporting guidance and provided comparable figures (ENDS Report, May 2011).

The government also made a pledge on environmental reporting in the 2010 coalition agreement, promising to ensure directors’ “social and environmental duties” were covered in company reports. This was to be achieved by bringing back operating and financial reviews shelved by Gordon Brown (ENDS Report, December 2005).

However, this promise is now in doubt after the business department (BIS) came forward with only cosmetic changes to company reporting rules last year (ENDS Report, October 2011). Compulsory audits of non-financial information and statutory corporate reporting guidelines were both ruled out by BIS because it was estimated they would add £57m and £8m per year respectively to the costs of quoted companies.

BIS is aiming to publish draft regulations on corporate reporting later this year.

The DEFRA consultation on new environmental reporting guidance will run until 17 October.

Proposals for mandatory greenhouse gas reporting by UK quoted companies were also published by DEFRA on 25 July (ENDS Report, July 2012).

Please note this article has been republished with the kind permission of the ENDS Report.