UK’s Largest Consumer Businesses Are Increasingly Focussed On ‘Net Zero’ Activity, Says New Report

FTSE 100 firms in the consumer sector refer to ‘ESG’ and ‘diversity’ less in their most recent Annual Reports than they did 12 months earlier, but according to a new study by law firm Irwin Mitchell, these businesses appear to be stepping up their net zero activity.

The Beyond Words report has analysed the two most recent Annual Reports from the 50 retail, leisure, and hospitality companies in the FTSE 350 - examining the frequency of words and phrases such as ‘ESG’, ‘decarbonisation’, ‘Scope 3’ emissions, ‘cyber security’, ‘diversity’, ‘equality’ and ‘inclusion’.

The study discovered a 3% reduction in the use of the ‘ESG’ acronym amongst the FTSE 100 and an 8% fall in the number of words associated with diversity, equity and inclusion (DE&I).

At the other end of the FTSE 350 index, Irwin Mitchell’s analysis reveals that FTSE 250 firms have increased ESG mentions by 37% and DE&I related phrases by 10%.

Specialist lawyers at Irwin Mitchell attribute the fall in ESG mentions amongst the FTSE 100 to not only a recognition amongst these businesses to some changes in investor interest in ESG, but also its maturity which has resulted in its integration and it being viewed as basic expectation for businesses.

Expert Opinion

“FTSE 100 firms continue to focus on ESG opportunities, expectations and requirements but these findings could indicate a higher level of maturity around the way ESG principles, strategies and goals are being embedded and talked about by these firms.

“ESG principles and commitments remain key to establishing and growing sustainable business to the FTSE 100, but the language being used to describe these commitments appears to be changing and widening.

“Although there is a fall in explicit ESG references amongst the FTSE 100 reporting, the conversations we are having with our clients continue to demonstrate a strong focus in key ESG related areas particularly from an environmental perspective and in relation to areas of business risk and resilience including cyber security, business ethics, supply chain management.”
Hannah Clipston, partner at Irwin Mitchell

Environment focus

Environmental words such as ‘climate change’, ‘net zero’ and ‘decarbonisation’ appear more frequently in the most recent FTSE 100 reports (+26.8%) compared to the FTSE 250 (+23.9%).

Mentions of Scope 3 emissions – the category of greenhouse gas emissions that are indirect emissions resulting from the activities of an organisation but occur from sources not owned or controlled by the organisation - increased across the FTSE 350 by 57%.

In addition to the number of mentions increasing, the study found that 80% of the businesses in the FTSE 100 referred to Scope 3 more in their most recent Annual Report compared to the previous editions.

Keith Davidson, environmental law partner at Irwin Mitchell, said: "Businesses of all sizes must prioritise climate action and sustainability to succeed in an evolving business landscape. For some, reporting on Scope 3 emissions is now a legal requirement, not just a voluntary commitment.

“Companies are now choosing business partners based on their environmental credentials and carbon reduction actions. If you’re unable to demonstrate climate action, you may risk losing clients.”

Diversity & Inclusion

Charlotte Rees-John, partner and Head of Irwin Mitchell’s Retail, Hospitality and Leisure sector, said: “Annual Reports are a window into the soul of an organisation. They are carefully curated documents and are a vital tool for companies to communicate their commitment to their numerous stakeholders on a range of issues, including ESG.

"The report raises concerns about the potential loss of focus on diversity and inclusion initiatives amongst the FTSE 100 and underscores the need for businesses to prioritise DE&I, alongside sustainability efforts, to foster a truly responsible business environment."

Other findings

• FTSE 250 organisations on average refer to DE&I (diversity, equality & inclusion) 53 times in their most recent annual reports, which is up 10% on the previous year’s figure.
• Amongst the FTSE 100, there was a 8% fall in the number of words associated with DE&I in the most recent reports compared to previous ones are.
• References to Scope 3 emissions, the category of greenhouse gas emissions that are indirect emissions resulting from the activities of an organisation but occur from sources not owned or controlled by the organisation, have increased by 73% in the most recent annual reports.
• Greenwashing was mentioned only once in the FTSE 250 reports, with no mentions among FTSE 100 companies.
• FTSE 100 businesses increased their use of the term 'cyber security' by 18%, while the FTSE 250 saw a smaller 2% increase.

Irwin Mitchell offers a comprehensive range of ESG advisory services including diversity training modules, cyber security, and Net Zero readiness assessments. 

About the research

The analysis for this report was conducted in-house between 28th and 31st January 2024. The research examined the two most recent annual reports from each of the 50 businesses included in the analysis. Several search words and phrases were used, including 'ESG', 'cyber', 'climate change', 'decarbonisation', ‘Scope 3 emissions’ and 'net zero'. For the DE&I analysis, words such as 'diversity', 'inclusion', 'equality', 'ED&I', 'D&I', and 'DE&I' were searched. In cases where 'diversity' and 'inclusion' were mentioned together, it was counted as one mention in the overall count. Each search was manually checked for accuracy.