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How the top firms fare on resource efficiency

Almost all the biggest companies in the UK recognise the importance of managing their waste, but fewer than one-in-three put a numerical value on what they want to achieve publicly. Fewer than half talk about waste reduction or re­cycling in their annual corporate and social responsibility reports (CSRs), which require them to outline “the impact of the company’s business on the environment”.

MRW exclusive

It is a common maxim in industry that ‘if you can’t measure it, you can’t manage it’. But that philosophy is not commonplace among London-list corporates on the FTSE100 when it comes to their resource efficiency, MRW research indicates.

The FTSE100 includes the shares of those companies listed on the London Stock Exchange with the highest

market capitalisation. Being the market leaders in the UK, they set examples of best practices, not only with their financial performance but also with their environmental practices.

For this reason, MRW decided to study what those companies told their shareholders and the general public regarding their waste management. Some had extensive sections dedicated to the matter, others just a few lines. MRW captured a snapshot of the most common practices, strategies and attitudes from the CSR reports available at January 2014 (see methodology).

Reporting on waste arisings or re­-cycling is not a requirement of UK company regulations. Martin Webster, partner at law firm Pinsent Masons, said that the Companies Act 2006

mandates businesses to disclose in an annual report information on “environmental matters, including the impact of the company’s business on the environment”.

The law also requires companies to disclose any policies they may have in relation to those environmental matters and report their effectiveness. If they decide not to do so, they have to explain why. As most companies consider waste management to be one of their environmental impacts, their CSR is likely to contain a mention of it, said Webster.

MRW research confirmed that almost all the CSRs of the FTSE100 companies contained a reference to waste, even if only minimal, with a great variety among methods and information reported.

Public statement

bottom line

MRW looked at whether companies provided figures for waste arisings, and had stated publicly any commitment to improve their waste performance. In this there was also a great deal of variety, with some companies setting a number of targets for waste prevention, recycling and landfill reduction, while others simply reported generic statements such as ‘encouraging employees to segregate waste’ or ‘eliminating waste’ (see methodology).

In order to compare CSRs, MRW set criteria and analysed how the report scored against them.

The first element assessed was: does the company provide a figure, of any sort, for waste produced? For 75 firms, MRW was able to identify at least one piece of data related to arisings. This was an encouraging start, since knowing and communicating how much waste a business produces is the basis for any meaningful waste reduction or recycling planning.

But when MRW looked at whether companies had a strategy in place to deal with their waste, the picture was less positive.

A waste strategy was defined as having waste prevention, recycling or landfill diversion targets. MRW found that less than half of the FTSE100 businesses, or 47 corporates, mentioned one of those elements. The most pledged commitment was landfill reduction, with 37 companies referring to cutting waste to landfill or decreasing reliance on that disposal method.

Business in the Community, the national charity led by the Prince of Wales, which produces a Corporate Responsibility Index each year, has noticed that more firms have introduced similar objectives in their sustainability strategies. But Maria Grey, head of sustainability development, pointed out that the commitment of diverting materials from landfill remains vague.

Understand the term

“It is very important to understand what it means in practice,” she said. “When you look at the waste hierarchy, landfill is obviously the worst option. But just above is incineration, which is slightly better but still an inefficient way to use materials. A ‘zero waste to landfill’ target could potentially mean that a business is just incinerating all its waste.”

A stronger waste strategy would be establishing targets for prevention or recycling, an idea backed by the Carbon Trust. It has recently launched its Waste Standard (see box overleaf), a voluntary certification which assesses com­panies’ practices in terms of waste and recycling.

“Setting targets is extremely important,” said Will Griffiths, waste expert in the Trust’s advisory team. “If a company understands the importance of resource efficiency and waste, it wants to have some strategy for moving in a downward trajectory and continuing to improve. Targets are the best way to do it. They should be specific, measurable and related to the company’s activities.”

MRW research indicated that 19 companies of the FTSE100 had numerical recycling targets in their CSRs. They ranged from a minimum of recycling 50% of waste to recycling all waste produced, or were set out in the form of achieving a percentage increase on the previous year. The most common time frames were 2015 and 2020.

As for waste minimisation, only 12 companies included some numerical reduction targets in their reports. Those varied from 5% objectives to 50%, with the most ambitious being related to construction waste. In total, only a third of the FTSE100 businesses mentioned waste prevention or recycling targets.

The decision to mention those targets in a publicly available document indicates a stronger commitment. “It is putting [the targets] on a pedestal and pledging to commit to customers and stakeholders that the company will meet them,” said Griffiths. “Nobody likes to fail to meet targets.”

After assessing the CSRs against the waste strategy criteria [see methodology], MRW ranked the companies on how many of them they matched. Retailers have traditionally been pioneers of sustainable practices and, indeed, some of them ticked the most boxes.

“Companies like Marks & Spencer and Unilever are longstanding exemplars of ambitious publicly stated targets,” said Griffiths.

Waste is one of the seven pillars of M&S’s sustainability strategy. Its CSR waste section contained figures for waste arisings and explained the company’s recycling targets, divided by waste streams, from food packaging to clothes hangers. It also included waste prevention targets such as reducing operational waste by 25% and construction waste by 50%. Sending no oper­ational and construction waste to landfill was also mentioned among the company’s objectives.

Waste footprint

Unilever offered a detailed insight into its waste production and waste strategy. The company presented pie charts of its ‘waste footprint’, detailing its composition both by category and material type. This waste strategy included reduction targets, such as slashing packaging by a third by 2020 and reducing waste sent for disposal to below 2008 levels by the same year. A zero non-hazardous waste to landfill by 2015 objective was also mentioned.

Retailer Kingfisher, parent of the DIY chain B&Q, indicated how much of its waste has been sent to landfill, incineration or recycling. It set an 80% recycling target and a zero waste to landfill commitment for 2020.

In terms of waste prevention, Kingfisher seemed to follow a circular economy approach by setting out the innovative target of introducing 1,000 products with closed-loop credentials by 2020. This means the products need to be made from 90% or more recycled materials or materials diverted from landfill, designed to be disassembled into component parts, and built so that they can be brought back to Kingfisher for repair or recycling.

The retailer also stated that it will work with partners across the product life-cycle to achieve 10 closed-loop supply chains by 2020.

Waste management concerns were also in evidence among companies in other sectors. For example, pharmaceutical company AstraZeneca, which recently rejected a foreign takeover bid, included ambitious waste and recycling commitments. It set a hazardous waste reduction target per million of sales and a non-hazardous waste reduction target per employee, as well as citing a goal of decreasing the proportion of non- hazardous waste sent to landfill.

Notably, AstraZeneca also demanded to its key suppliers to report on waste and set targets. The insurance giant Aviva presented a detailed breakdown of its waste streams, and indicated which proportion of each had been recycled. The company set an absolute tonnage target to reduce waste arisings and a relative target to increase recycling. It also said it was working towards zero waste to landfill worldwide by 2020.

On the other hand, 25 companies did not provide figures for waste arisings, and the CSRs of 15 of them contained little or no reference to the subject, which suggested they do not consider waste to be one of their main environmental impacts.

The Carbon Trust’s Griffiths said this might be the case for some businesses, but he encourages them to perform a ‘diagnostic study’ to establish how far that is true of their situation.

“If you haven’t measured [your waste], you can’t prove a case for not looking at it any further. You have to build the case for overlooking any waste stream or waste in general,” he said.

Engineering giant ARM Holdings’ report said it had investigated the feasibility of collecting data on waste: “The investigation into our waste confirmed that we produce negligible quantities… We concluded therefore that there is little value in collecting this data regularly, but we will be reviewing our position as the company grows.”

Fellow engineer Melrose Industries did not refer to waste at all, and said it was because it was expecting its subsidiaries to establish their own practices. “Each of the group’s businesses are committed to ensuring that their operations have a minimum adverse effect on the environment and that ongoing reductions are achieved, where practicable,” it said.

Nonetheless, many of the companies that did not mention figures for waste arisings said they were in the process of developing targets or deciding on baseline data to benchmark future targets, signalling that waste management is gradually gaining importance in the corporate world.

What the CSR reports themselves would not reveal were the motivations that prompted companies to draft and then commit to waste strategies.

Pinsent Masons’ Webster said that compliance to regulations was an “extra push” but not the main reason for waste reporting. As mentioned above, UK laws do not specifically require businesses to disclose information on waste management, but to do so generally on environmental matters.

“Companies have not been driven so much by what is required by legislation, rather by what they see as good citizenship, the way they wish to portrait themselves to the public and to their stakeholders,” he commented.

Prasanta Kumar Dey, professor in operations and information management at Aston Business School, believed that an increased emphasis on waste management is part of a trend in the past decade, when environmental concerns gained more influence in the corporate sphere.

“It is in this decade that we started to know more about greenhouse gas emissions, the negative environmental contribution of industry, and started talking about a sustainable way to do business,” he said.

Reducing overheads

However, Professor Dey stresses that the main driver for companies remains profit-making. Waste minimisation and recycling can play a part in improving a company’s financial performance because they can reduce overheads.

“If you consider the entire supply chain, if you add the intangible, then you will find that [good] waste management helps companies to generate profits, in terms of cost reduction,” he explained.

Those ‘intangibles’ are savings made on landfill tax or gate fees, as well as using a company’s own staff to manage waste. Another aspect, he said,was minimising waste through efficient inventory management: “It is something we teach here at the business school too. ‘How do you manage your inventory effectively so that you have minimum waste?’ “

Some companies have developed methods to do so, for example, by getting to know their customers who use loyalty cards.

Resources have to be invested in any efficiency scheme, but businesses look to get it back by reducing the inventory and, in turn, reducing waste and costs. Dey pointed out that companies would have to make some initial investments but they will then see a return in terms of costs reduction in the longer term.

If they manage to do that, they please shareholders and appeal to other potential investors. It is about the bottom line, after all.

  • Additional reporting by Thirza Tooes

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