New Study Suggests Firms Are Looking Closely At Decarbonising Their Supply Chains

A new Environmental, Social, and Governance (ESG)* report suggests the UK’s largest retailers are stepping up their efforts to become greener but losing focus on diversity & inclusion initiatives and cyber security.

National law firm Irwin Mitchell has analysed the Annual Reports of the retailers in the FTSE 350**. The study looks at the frequency of the phrase, ‘ESG’, along with other related words such as ‘diversity’, ‘net zero’, and ‘Scope 3’ emissions. As part of the study, Irwin Mitchell has examined the current and the previous annual reports.

The total number of references to ‘ESG’ amongst retailers increased from 1,105 to 1,192 across all the retail businesses listed in the FTSE 350. Furthermore, 62.5% of companies use the phrase ‘ESG’ more frequently in their most recent annual reports compared to the previous edition.

In terms of the frequency of 'ESG' mentions by consumer sub-sectors within the FTSE 350, retail appears to lag those involved in the production of FMCGs and leisure & hospitality firms. FMCGs companies use the ESG acronym the most whilst leisure & hospitality firms recorded a 20% rise in mentions. Retail’s use of the phrase is higher than leisure & hospitality, but the annual increase is just 6.5%. 

Diversity & Inclusion

There are variations in the number of mentions about diversity, equity & inclusion (DE&I) also. The leisure & hospitality sector had a small rise of 3%, with mentions increasing from 63 to 65. In contrast, the retail sector had a decrease of almost 7% in DE&I mentions.

Expert Opinion

“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 retail sector and underscores the need for these businesses to prioritise DE&I, alongside sustainability efforts, to foster a truly responsible business environment."
Charlotte Rees-John, partner and head of Irwin Mitchell’s Retail, Hospitality and Leisure sector

Environmental

According to Irwin Mitchell, there is a notable increase in the use of environmental words such as ‘climate change’, ‘net zero’ and ‘decarbonisation’ within the retail sector’s annual reports.  Mentions of climate change have gone up by 8% whilst ‘net-zero’ and ‘decarbonisation’ increased by 46%.

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, has increased by 73% in the most recent reports.

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.”

Other findings from the research included retailers overall referring to cyber security 5% less.in their most recent annual reports.

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

*Environmental, Social & Regulation    ** The FTSE 350 is the 350 largest companies by market capitalisation on the London Stock Exchange. It consists of the FTSE 100 and FTSE 250

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.