Nearly 50% of FTSE 100 Firms Revise Climate Scores

Investors and employees are facing challenges in determining whether their companies are meeting net-zero objectives, as almost half of the UK’s largest publicly listed companies have revised their climate performance metrics for the previous year.

According to a Deloitte analysis, 46 companies in the FTSE 100—often referred to as the “premier league” of the London stock market—have had to amend their previously reported sustainability figures this year.

Approximately half of these restatements resulted from modifications in the methods used for data collection and recording, while nearly a third were necessary to address errors identified by management teams.

The majority of revised scores pertained to greenhouse gas emissions, an area of significant concern for many firms. Deloitte’s report highlighted that companies found it particularly challenging to accurately report their “scope 3” emissions, which are indirect emissions linked to business activities such as employee commuting, business travel, and waste management.

As environmental, social, and governance (ESG) criteria gain prominence, Steve Farrell, a partner and the lead for sustainability assurance at Deloitte, noted that stakeholders are increasingly scrutinizing the front sections of annual reports rather than solely focusing on the financial data in the latter part. Job seekers may choose companies based on their environmental policies, and investors might make choices driven by sustainability data.

“UK public companies, along with many significant unlisted firms, are committing to net-zero targets and sustainability goals,” Farrell stated. “What truly matters is how these organizations are monitoring their progress, as decisions are made based on the reported ESG data. For example, some sustainability-linked loans adjust interest rates according to emissions produced and reported data,” he added.

One recent case is Drax Group, owner of the UK’s largest power station in North Yorkshire, which faced a £25 million fine from Ofgem, the energy regulator, for not submitting accurate sustainability information regarding the sourcing of wood pellets used for electricity generation.

While financial restatements are infrequent due to established reporting practices, ESG reporting is still relatively novel. Farrell indicated that the numerous restatements by various companies could be interpreted positively.

“This analysis can be interpreted in different ways,” he remarked. “While one might view it as an indication of issues with last year’s reported figures, it can also reflect companies’ commitment to improving their reporting accuracy.”

Deloitte anticipates that the revision of sustainability scores will become more frequent in light of new reporting regulations and enhanced data collection practices, as companies seek to monitor more data points.

“It’s crucial for organizations to prioritize transparency regarding their capabilities and limitations,” Farrell emphasized. “This process is complex and will require time, but greater transparency can lead to progress,” he said.