Environmental management and reporting involves identifying,

Size: px
Start display at page:

Download "Environmental management and reporting involves identifying,"

Transcription

1 Guidelines on Environmental Management and Reporting for the Financial Services Sector A practical toolkit Environmental management and reporting involves identifying, understanding, controlling and communicating environmental impacts, risks and opportunities. These Guidelines on Environmental Management and Reporting provide an implementation toolkit that seeks to enable wider and more consistent engagement in environmental management and reporting across the sector. Building upon the experience of many financial services organisations, the Guidelines highlight why environmental management and reporting is an important part of corporate governance. The Guidelines identify the business activities that create key environmental issues for the sector. It gives step-by-step guidance for developing management processes such that environmental risk can be avoided, governance standards met and business opportunity realised. Developed by the FORGE Group These Guidelines have been prepared by the FORGE Group a consortium of some of the UK s leading financial service organisations. The consortium consists of representatives from The Abbey National Bank, Barclays, CGNU, Lloyds TSB Bank, Prudential, The Royal Bank of Scotland and Royal & Sun Alliance. Development of the Guidelines was led by CGNU and consulting support was provided by PricewaterhouseCoopers. The Guidelines also incorporate input from a wider selection of financial and non-financial sector organisations that participated in a stakeholder dialogue process. The UK Department of Trade and Industry sponsored development of the guidance with support from the Department of the Environment, Transport and the Regions. The Association of British Insurers (ABI) support the development of these Guidelines and British Bankers Association (BBA) recognise the Guidelines as an important step. These Guidelines are the first step and they will evolve as market and legislative demands develop to address new challenges. It may be appropriate, in time, to expand the Guidelines to include social and ethical governance and sustainability. Guidelines on Environmental Management and Reporting for the Financial Services Sector Page 1

2

3 Contents Part 1: The Financial Services Sector and the Environment Page 3 Why is environmental management and reporting important for the sector and how it can impact bottom line performance and licence to operate? Success in environmental management and reporting involves knowing what needs to be managed and how this can be achieved. The latter sections of the guidance aim to address these information needs. 1.1 What is driving environmental management and reporting? 1.2 What are the benefits of environmental management and reporting? 1.3 What are the environmental impacts of the financial services sector? 1.4 How can these environmental impacts be managed and reported? 1.5 About these Guidelines Part 2: Toolkit for developing a management and reporting system.... Page Planning for system implementation The early decisions before developing a programme; making fundamental decisions on scope, timeframe and approach. 2.2 Phasing system implementation and development Deciding where to start what to consider when determining programme development and roll-out. 2.3 Implementation toolkit Guidelines for the individual/team responsible for the development of a complete management system. Presented as individual stages, with Tips for implementation, to enable the system to be built right first time in a planned and structured manner. The following stages are discussed: 1. Develop the evidence 2. Obtain Board approval 3. Complete an Environmental Review 4. Draft the Group Environment Policy and Objectives 5. Design the environmental management system (EMS) 6. Implement and operate the EMS 7. Audit the EMS 8. Report to the Board 9. Prepare Environmental Reports (internal and external) Part 3: Business Activity Guidelines Page 36 For business managers and practitioners, these Guidelines present a route map for integrating environmental management and reporting into key business processes. Individual action points take practitioners from starting out to progress towards achieving current good practice for the sector, including identification of some suggested environmental reporting data for each business activity. The following business activities are discussed: Indirect (core business) impacts General insurance and reinsurance Risk control surveying Fund and asset management Property portfolio management Capital raising, equity ownership and project finance Commercial lending Debt recovery Leasing of equipment and property Retail banking and personal lending Direct (operational) impacts Property design and facilities management Energy management Waste management Transport management Procurement and supply chain management Appendices Page 67 Appendix 1: Technical Reference sheets These offer all those involved with environmental management and reporting an understanding of some key environmental issues, legislative requirements and best practice standards. They discuss and provide references to further information on: 1. Environmental legislation and other standards 2. Environmental management and reporting standards and guidance 3. Working with small suppliers and customers which are small and medium sized enterprises 4. Climate change (also known as the "greenhouse effect" and global warming) 5. Global environmental damage: ozone layer, biodiversity, deforestation 6. Sustainable development and eco-efficiency 7. Environmental labelling and "product" take-back schemes Appendix 2: Further information sources on the internet Appendix 3: Glossary Guidelines on Environmental Management and Reporting for the Financial Services Sector Page 2

4

5 Part 1 The Financial Services Sector and the Environment Why is environmental management and reporting important for the sector and how it can impact bottom line performance and licence to operate? 1.1 What is driving environmental management and reporting? 1.2 What are the benefits of environmental management and reporting? 1.3 What are the environmental impacts of the financial services sector? 1.4 How can these environmental impacts be managed and reported? 1.5 About these Guidelines Guidelines on Environmental Management and Reporting for the Financial Services Sector Page 3

6

7 Part 1 The Financial Services Sector and the Environment The scrutiny of internal and external stakeholders is twofold: performance in terms of direct (operational) impacts, and indirect (core business) impacts resulting from the management and delivery of financial sector products and services. This scrutiny is no longer from just environmental activists, increasingly it includes: National governments Institutional investors Shareholders Customers Suppliers Employees 1.1 What is driving environmental management and reporting? The financial services sector is under increasing scrutiny both internal and external to demonstrate commitment to environmental management and reporting. External scrutiny increasingly publicised through the issue of performance indices and rankings focuses on measuring and ranking performance against competitors. In some instances these indices are produced remotely with the target company having no opportunity to contribute to or review the results before they are launched into the public domain: Dow Jones Sustainability Group Index Business in the Environment Index PIRC Survey SERM rating All of these stakeholder groups have the ability to influence a business short-term success, operational continuity and long-term future. Whilst risk drives action, so can opportunity. For this sector, substantial achievements in environmental performance can occur as a direct result of taking market opportunities that increase income; for example, new products and new product delivery and service channels. Whilst engaging in environmental management and reporting remains voluntary for the sector due to limited directly relevant environmental legislation, it is increasingly achieving priority at the highest management levels. Key influences include: Turnbull Report Company Law Review Pensions Act guidelines for achieving internal controls to manage all business risks analysing Directors duties and corporate responsibilities to stakeholders requiring trustees to state their position on environment and social issues in investments In addition, the UK Government has stated its intention to "name and shame" those who do not make environmental performance information publicly available. Various governments are introducing environmental criteria as a mandatory component of documents of tender such that, to be eligible to participate, demonstrable environmental management processes need to be in place; and there are emerging requirements of individual Socially Responsible Investment (SRI) codes and ethical investment policies. Guidelines on Environmental Management and Reporting for the Financial Services Sector Page 4

8 Figure 1: Summary of key drivers for environmental management and reporting Strategy Improve market share through new/enhanced products/services Provide support to wider business strategy, opportunity for new strategic initiatives, and improved brand positioning Enhance value to shareholders/stakeholders Improve risk management and internal controls Demonstrate tangible response to stakeholders who want to see evidence of corporate environmental commitment Respond to a real, and growing, risk to (and opportunity for) business commitment Drivers to implement environmental management and reporting Management Several within the sector have recognised the implications how negative risk must be avoided and reduction in environmental impact achieved and commenced environmental management and environmental reporting programmes. Certain global financial organisations, some with a diversity of financial services activities, are implementing global management systems and are committed to producing verified public environmental reports. All of these organisations have recognised the benefits and opportunities that environmental management and reporting enables them to achieve: Improves the cost : income ratio Protects income Attracts new income streams Improves brand positioning Achieves investor confidence Communicates facts to global stakeholders Improve operational efficiency Reduce operational costs contributing to improved cost : income ratio Respond to increasing level of external monitoring and benchmarking of performance by external organisations Operational performance Provide transparency in performance to institutional investors, shareholders and other stakeholders Establish dialogue with stakeholders Achieve self-assessment of corporate governance processes, in respect of environmental risks Reporting 1.3 What are the environmental impacts of the financial services sector? Direct impacts from internal operational activities. Significant direct environmental impacts are primarily associated with internal operational activities. These include heating and lighting in buildings, transport of employees and materials, waste in all its forms, purchasing of goods and services and use of resources such as energy, paper and water. Good management of these activities will assist in achieving performance improvements, improve operational efficiency and create potential for improvement in the cost : income ratio. 1.2 What are the benefits of environmental management and reporting? Demonstrating a commitment to environmental issues is increasingly becoming a necessity. It is no longer a question of whether environmental management and reporting will become essential it has. It is now a question of when, if unmanaged, it becomes critical to business continuity. Indirectly, as a result of commercial activities. The environmental issues associated with company policies and practices for lending, investment, insurance and other business activities may create financial, legal, operational or reputational risk. These indirect impacts are more difficult to manage, as frequently the sector can only exert influence rather than control. However, they are becoming a priority due to (a) the potential severity and scale of impact on business performance including reputational risk and (b) the business opportunity that can be created through positive attention to the emerging concerns of institutional investors and customers. Guidelines on Environmental Management and Reporting for the Financial Services Sector Page 5

9 1.4 How can these environmental impacts be managed and reported? A management and reporting system must include: Determination of the environmental impacts including prioritisation of impact areas, identifying management systems, achieving data collection, analysing performance and setting objectives and targets; Board level commitment and input to the environmental programme to ensure effective uptake and implementation of Environmental Policy throughout the organisation; Robust procedures and systems which are integrated into business management processes, rather than operated as a "virtual system" which is detached from the wider business decision making processes; Flexibility in approach which allows each area of the business to implement policy in a manner that will withstand change within the business and evolve and develop in line with market demands and expectations; Training and awareness raising, to gain understanding and buy-in from staff at all levels and in all areas of the organisation, also creating the opportunity to inform stakeholders and raise stakeholder understanding; Regular monitoring and reporting of key performance areas in order to advise the Board (and stakeholders) where policies and procedures are working well and where improvements are required; and On-going dialogue and engagement with stakeholders inside and outside the organisation to continue to raise awareness levels and achieve improved understanding, confirm that the issues of concern (actual and perceived) are being addressed and that the response reflects current knowledge and good practice. The necessary scale and complexity of environmental management and reporting will be specific to every organisation, dependent on the nature and scope of the services provided and internal organisational structures and processes. These Guidelines highlight some of the main business activities that create environmental impacts and suggest environmental management and reporting plans for each (Part 3). Through this, the Guidelines start to identify where environmental factors could encourage business practice and product design to deliver enhancement in environmental performance. Figure 2: Integration of environment into core business processes Strategy Integrate environment into business decision making to demonstrate the direct and material connections with business performance Differentiate products/services using environmental criteria Proactively manage environmental risks and opportunities to support shareholder value Incorporate environment into procurement policies and supplier reviews Incorporate environmental factors into transport and travel management Include environmental considerations in property design and facilities management programmes Operational performance Integrated environmental management and reporting Include environment within existing risk management policies and processes. Establish key environmental performance indicators and targets Integrate environmental objectives into staff performance criteria and training Expand internal audit and controls to cover environmental management systems Include environment in investor relations programmes Include environment within community programmes Undertake stakeholder communication and encourage feedback on performance Management Reporting The Guidelines identify the key stages of development of a management system and discuss individual tasks that need to be completed within each stage. They contain tips on how to achieve these efficiently and effectively (Part 2). Full use of existing management processes is encouraged. Guidelines on Environmental Management and Reporting for the Financial Services Sector Page 6

10 1.5 About these Guidelines This toolkit has been developed to help to achieve a higher level of engagement across the sector and encourage consistency in approach. When implemented, the tools contained within these Guidelines are designed to provide a foundation upon which the organisation will be able to build in order to meet related future environmental management and reporting needs. Prepared by some of the leading UK based financial services organisations, the Guidelines build upon the lessons already learned within the sector and have been designed specifically to recognise the difficulties and issues for the sector in engaging and delivering environmental governance. These issues include, in particular: The organisational structures and cultures of financial services organisations; The significance of indirect impacts over which there is limited potential to achieve direct management control; These Guidelines will also help to achieve wider understanding of the sector s approach to environmental management and reporting among other interested parties and stakeholder groups. These Guidelines have been deliberately restricted to address environmental management and reporting issues. It is recognised that some emerging issues, for example social and ethical governance and responding to the sustainable development debate are very pertinent to the sector. As these issues develop, management processes will need to evolve to take them into account. These Guidelines are the first step to encourage all those in the sector to engage in environmental management and reporting. Subsequent revisions of these Guidelines are anticipated which will address more advanced environmental management and reporting issues and the wider governance issues created by the global move towards achieving a more sustainable future. The rapid pace of change currently taking place throughout the sector, its global reach and impact; The difficulty in balancing the often long-term nature of environmental risks and opportunities with the short-term focus of the financial markets; and The culture and level of awareness of environmental issues within the sector which, to date, have not driven action. The Guidelines have been constructed as a toolkit, to enable users to select individual tools that are of use to their own circumstances or to enable adoption of the full toolkit to provide a complete system. It contains a series of tools for those: With Board level responsibility, or directly answerable to the Board, for developing and overseeing Environment Policy, objectives and targets, and Group level stakeholder interaction; and With Group or business unit responsibility for day-to-day policy implementation and targets achievement and contributing to Group performance reporting. Guidelines on Environmental Management and Reporting for the Financial Services Sector Page 7

11 Part 2 Toolkit for developing a management and reporting system 2.1 Planning for system implementation The early decisions before developing a programme; making fundamental decisions on scope, timeframe and approach. 2.2 Phasing system implementation and development Deciding where to start what to consider when determining programme development and roll-out. 2.3 Implementation toolkit Guidelines for the individual/team responsible for the development of a complete management system. Presented as individual stages, with Tips for implementation, to enable the system to be built right first time in a planned and structured manner. The following stages are discussed: 1. Develop the evidence 2. Obtain Board approval 3. Complete an Environmental Review 4. Draft the Group Environment Policy and Objectives 5. Design the environmental management system (EMS) 6. Implement and operate the EMS 7. Audit the EMS 8. Report to the Board 9. Prepare Environmental Reports (internal and external) Guidelines on Environmental Management and Reporting for the Financial Services Sector Page 8

12

13 Part 2 Toolkit for developing a Management and Reporting system This section of the toolkit is targeted at the Group function which has the company-wide responsibility for the design and management of an environmental programme. It gives advice on getting started and obtaining Board commitment and then provides a stage-by-stage approach to implementing the programme. 2.1 Planning for system implementation The objective is to identify the strategic and significant environmental impacts of the organisation and establish an overall environmental management framework with supporting management processes. This framework should not be developed in isolation. Wherever possible, at all levels through the business, the framework and the supporting processes should be integrated into existing management structures and processes. In order to establish an environmental management system it is necessary to have: 1. An understanding of the environmental impacts of the organisation; 2. Board commitment to policy and stated objectives; 3. Planning and appropriate resourcing; 4. Definition of the environmental aims of the organisation; and 5. An understanding of the concerns of key stakeholders. Developing and implementing a full environmental management and reporting system is usually achieved in a series of stages to build a management process and associated feedback and reporting cycles. These stages are defined in the toolkit presented in this section. The key components of a management system should be common to all systems such that the outputs are broadly comparable. These are defined in this section and, as presented, accord broadly with international guidelines on environmental management systems. The specific detailed structure of the system will be unique to each organisation taking into account, for example: Existing organisational structures; Existing organisational priorities and commitments; Company culture; Product mix; and Customer base. 2.2 Phasing system implementation and development Most organisations develop a plan for the roll-out of the management programme such that, over a defined period of time, the entire business is incorporated within the system. Determining an appropriate programme requires consideration of: Business activities; Environmental impacts; and Environmental opportunities Business activities In the first phase, most organisations select one business unit or region. Core components of the system are defined, developed and put in place before implementation across other units/regions. The first phase should include a part of the business which: (a) Has the most significant environmental impacts; (b) Represents a significant proportion of the business; and (c) Is supportive of the development of the management and reporting programme. See Part 3 for description of the environmental issues relating to some of the main business activities. Guidelines on Environmental Management and Reporting for the Financial Services Sector Page 9

14 2.2.2 Environmental impacts Management systems do not have to address all environmental impacts at once it is important that priority is given to the significant impacts. The significance of impacts and the subsequent prioritisation will be determined by each organisation based on the identification and rating of the environmental impacts of the organisation/business (discussed further in Stages 1 and 3). Some prioritisation criteria are presented in Stage 3 and include: Are there applicable legal and governance requirements? Have the issues been subject to scrutiny and questions from investors? What level of risk (financial, legal or reputational) does this impact present to the business? What is the scale and severity of the associated environmental impact? The timeframe for implementation can range from months to years, and is at the discretion of the organisation. Factors that need to be taken into account when considering the timeframe for implementation include: The importance (actual and perceived) of environmental issues to the organisation; Resources available (primarily people and capital); Pressures, in particular from shareholders and other external parties; Competitor developments; Specific needs (for example, terms of reference requirements for certain investments); Legal and international environmental commitments (e.g. treaties); Industry benchmarks and codes of practice; and The current status of environmental management processes. Achieving a successful environmental management and reporting system is a goal in itself. For most organisations, it is a first step towards achieving a more comprehensive programme that, over time, could form the basis for the management of emerging governance issues, for example social and ethical issues and sustainable development. 2.3 Implementation stages The first and most fundamental step is to collect hard, persuasive evidence and determine a corresponding business case and programme of action for presentation to the Board. The subsequent critical step is to gain Board commitment to develop an environmental management and reporting system including, in particular, an Environmental Policy and objectives. Experience has shown that achieving buy-in from the Board can be a challenging and time-consuming task, frequently taking many months and some reiterations. From there, it is critical to develop the commitment of the business units to support and participate in system development and implementation. It is vital to establish communication and feedback mechanisms to inform all, including external stakeholders, of progress and achievements. As with other significant business issues, it is common practice to have a Board Director with responsibility for the environment. In medium and large organisations, the Board Director will normally require the support of a central environment management function (one or more persons) with responsibility for the actual development and implementation of the environmental management and reporting system. A network of environmental champions or managers typically supports the central team across different business functions (see Stage 2 of the implementation programme). The nine stages of the programme are outlined in Figure 3. Remember that: (a) Existing processes may already cover some stages. It is important, when developing the system components to determine whether these can deliver the required level of management control; and (b) The environmental management processes should be integrated, wherever possible, into existing management structures and processes. These Guidelines have been geared to provide information for those organisations starting an environmental management and reporting programme. For those organisations already progressing with programme implementation they may provide confirmation of approach and give some insight into progress made. Guidelines on Environmental Management and Reporting for the Financial Services Sector Page 10

15 Figure 3: Key stages in the development of an environmental management and reporting system Stage 1: Develop the evidence Stage 2: Obtain Board approval for environmental management and reporting strategy Stage 3: Complete an environmental review to identify environmental issues and impacts (if considering external verification process needs to start at this stage) Stage 4: Draft an Environment Policy and objectives Stage 5: Design and develop the management system components Stage 6: Implement and operate the management system Stage 7: Audit the management system Stage 8: Achieve Board level review and agree the way forward Stage 9a: Prepare environmental reports (internal) Stage 9b: Prepare environmental reports (external) (external verification is advised) Key: continuous improvement feedback Guidelines on Environmental Management and Reporting for the Financial Services Sector Page 11

16 TASKS STAGE 1: DEVELOP THE EVIDENCE TIPS FOR IMPLEMENTATION 1.1 Gain familiarity with the issues pertinent to the sector and competitor activity in environmental management and reporting TIP: This will involve reviewing reports and information within the sector, emerging best practice guidelines and government activities relevant to the sector, including position statements and legislation. TIP: Call on competitors already practicing environmental management reporting, where appropriate. 1.2 Undertake a strategic review of the business to identify the key environmental impacts, risks and opportunities to the business Determine, at a strategic level, the nature and scale of the environmental impacts. Document the risks that are presented to the business and potential opportunities for enhancing business performance. The overview should: Determine performance from a review of existing data; Review scope of data collection systems and collect further essential data if required; Determine scope of existing management processes (Group and businesses); Collect/review stakeholder feedback on (a) the issues for the sector and (b) the organisation s performance; and TIP: The overview must recognise any gaps or deficiencies in the existing management processes. TIP: There are various options for undertaking stakeholder dialogue. These include: Review of existing, publicly available survey data; Consultation (frequently via surveys) to gain information; or Direct interface through joint meetings and discussion groups. Typically, a representative sample of stakeholder groups is selected. External expertise is frequently sought to assist with this process. Once started, the dialogue will need to continue at key stages in the process. The level of detail and scope of dialogue develops as the system matures. Do not raise expectations through dialogue with external stakeholders at this stage if it is uncertain whether the Board will approve further development of environmental management and reporting. TIP: Clearly identify the criteria that will be used to determine the significance of the identified issues (see TIPS Stage 3.4). Identify the environmental aspirations and commitments of the organisation. Guidelines on Environmental Management and Reporting for the Financial Services Sector Page 12

17 TASKS STAGE 1: DEVELOP THE EVIDENCE TIPS FOR IMPLEMENTATION 1.3 Evaluate the findings of the strategic review The objective is to determine the sources of impact to inform decisions concerning the business need for a management and reporting system and its required scope. TIP: This review is probably the most critical stage in the management process as, at a strategic level, it forms the reasoning and justification to the Board for taking action and defining the type of action required. Develop an outline of the business need, to present to the Board sponsor. This will form the core of the business case (Stage 2.2), and should identify: Key objectives; Risks and benefits; Estimated resource need; Outline implementation programme (stating key business units, functions and/or activities); and Indicative timescale. 1.4 Identify and engage Board sponsor Identify a sponsor on the Board. The Environment Manager should present an outline of the business need for environmental management and reporting to the Board sponsor to engage wider board commitment. Where no Environment Manager has been identified, the Board sponsor will need to identify a suitable candidate. TIP: In the experience of the sector, the Environment Manager needs commitment to the project, a wide understanding of the business (in particular, core business products and services) and some environmental knowledge and prior training. Consider whether this is a full or part- time role this will depend up on the size and management structure of the organisation, as well as the scope of the intended programme. TIP: Commonly in the sector, sponsors have risk or facilities management responsibilities. However with indirect impacts resulting from products and services becoming an important issue for management, it is essential that the sponsor has a sufficient level of understanding of core business products and services. Guidelines on Environmental Management and Reporting for the Financial Services Sector Page 13

18 TASKS STAGE 2: OBTAIN BOARD APPROVAL TIPS FOR IMPLEMENTATION 2.1 Develop options for an environmental management system (EMS), using the findings of the strategic review and views of the Board sponsor Options may include: Integrate as an element in key business management processes; Establish management processes in key parts of the business; or Establish a full, dedicated management system. Determine preferred option and provide justification. TIP: In determining options consider: impacts on the business during implementation; ability to deliver short and long term goals; corporate aspirations in relation to competitor positioning and external stakeholder and regulatory pressures. In particular, the following issues should be considered: Key environmental issues requiring management attention; Key points of management control: the degree of central control/business unit autonomy; Existing environmental controls: optimum utilisation of existing systems/additional systems; Existing data collection and management systems; Policy structure: single Group policy/local Group and Business Unit policies; Environmental management structure: current and future (by business unit, region or function); Internal/external environmental reporting needs (including external verification if deemed appropriate): Group and/or Business Unit reports; Integration with other management systems: minimise cost/maximise benefit; Resource demand: personnel needs at Group and Business Unit levels during implementation and operation; Priorities: strategic and operational relating to brand and/or products; Applicable deadlines: existing commitments (e.g. reporting commitments), legal deadlines; Key values and principles; and Key stakeholder concerns and issues both for the sector as a whole and specifically for the organisation. Guidelines on Environmental Management and Reporting for the Financial Services Sector Page 14

19 TASKS STAGE 2: OBTAIN BOARD APPROVAL TIPS FOR IMPLEMENTATION 2.2 Prepare business case for environmental management and reporting strategy Consider developing draft alternative strategies for Board review. TIP: The business case needs to reflect the particular pressures and opportunities for the sector as a whole and, in turn, for the organisation, to reflect how and why environmental performance is becoming a key business issue. Particularly, identify how managing environmental performance impacts overall business performance, is necessary to meet corporate governance requirements and is required to maintain competitive position. The business case should identify the timeframe, in terms of getting started and achieving a functioning system. TIP: Highlight the connections between business and the environment including, in particular: opportunities to improve financial performance through environmental management, competitor initiatives and progress, the level of environmental risk exposure, relevant legal developments (e.g. corporate governance requirements) and new business opportunities. TIP: Compile supporting information for inclusion in the business case including details of competitor activities, environmental risk exposure and business opportunity potential. TIP: If external environmental reporting is intended, it needs to be considered from this stage forward in order that reporting (and, if appropriate, verification) needs are addressed. 2.3 Obtain business unit support and establish network of "champions" who will form the implementation team The team should include: Business unit personnel (see Part 3, for key business activities/units); People from each geographic territory (as appropriate); TIP: Obtaining the support of the business units may take some time and frequently involves a series of meetings, presentations, awareness raising and training sessions. It is critical to achieve their support and involvement to enable the resulting management system to be practical and pertinent to the business and to achieve the required level of ownership throughout the organisation. TIP: External experts could be used to complement the in-house team to make sure that the organisation establishes ownership of the system and to make sure that the system fits within existing organisational structures and cultures. For direct impacts: staff from central support functions (in particular facilities management, risk management, credit management); For indirect impacts: staff from within the core business units; Environmental specialists; and External expertise (optional). Guidelines on Environmental Management and Reporting for the Financial Services Sector Page 15

20 TASKS STAGE 2: OBTAIN BOARD APPROVAL TIPS FOR IMPLEMENTATION 2.4 Report to the Board and obtain commitment to preferred strategy Present business case to the Board. Debate the options and obtain Board agreement to the selected strategy. Communicate commitment to all staff and key external interested parties (e.g. investors, customers and shareholders). TIP: An internal note to all staff, signed by the Board sponsor, should be circulated to demonstrate the Board s commitment. It should identify a contact point and identify the process of development and implementation. TIP: Once communication with staff has commenced, it must be continued regularly. TIP: Communication with external stakeholders may be appropriate. Separate, formal communication may not be necessary; however, it is often useful to state the Board position in other communications (e.g. Annual Report and Annual General Meeting (AGM)). Guidelines on Environmental Management and Reporting for the Financial Services Sector Page 16

21 TASKS 3.1 Scope of the detailed environmental review STAGE 3: COMPLETE AN ENVIRONMENTAL REVIEW TIPS FOR IMPLEMENTATION TIP: Key tasks within the review include: Build on the evidence gathered in Stage 1. The objective of the review is to determine the detailed nature, scale and source of impacts to provide information for the setting of policy, objectives and targets. It will also inform the process of scoping and designing the detail of the management system and preparing the programme for implementation. Define the scope of the review in terms of: Environmental impacts that will be covered; and Coverage in terms of business units/regions/functions to be included. Understand the extent and nature of current environmental management controls and their success, in particular the comprehensiveness and structure of existing data collection systems; Identify the environmental impacts over which the organisation will exert management influence (indirect or "core business" impacts), or control (direct or operational impacts); Review the state of compliance with existing Environmental Policy and other environmental commitments (e.g. United Nations Environment Programme (UNEP) statements); and Determine, in detail, those impacts/activities that will be the focus of the environmental management programme. TIP: The findings of the environmental review are the foundation for the management programme. The review needs to provide sufficient and accurate information such that the resulting programme is appropriate to the impacts while remaining achievable. If the review misses key risks (either actual or perceived), the future Policy, objectives and targets may be deficient and the system potentially subject to criticism. TIP: Document reasons for excluding business units, regions and/or certain functions from the review if these have an identified environmental impact that the organisation can influence or control. Wherever possible, justify exclusions using business, as well as environmental, reasoning. 3.2 Prepare for the environmental review Define the review methodology, identify mechanisms to obtain background information, involve key stakeholders and develop a work and interview plan. Provide instruction to the review team. Consider preparation of an environmental review questionnaire. TIP: Consider using external consultants or internal specialists to support the team. Internal specialists will include personnel from central support functions and core business personnel involved with product design, development and delivery. TIP: The review approach is most commonly influenced by the availability of personnel and the balance between central control and business unit autonomy. The review process can range from travel of a central team to locations to conduct reviews, through travel by appropriate in-country business unit or regional representatives, to local completion assisted by local internal or external experts as required. If reporting is intended, it can be useful to involve the reporting and verification teams at this time. Guidelines on Environmental Management and Reporting for the Financial Services Sector Page 17

22 TASKS STAGE 3: COMPLETE AN ENVIRONMENTAL REVIEW TIPS FOR IMPLEMENTATION TIP: Identifying pertinent legal requirements and other external requirements is an important element of the review process. There are various ways in which this can be achieved, ranging from preparation of a specific register of environmental regulations and standards, through to use of published sources of information. It should be recognised that any publicly available information is not likely to be tailored to reflect the legislation relevant to the sector. (See Appendix 1, Reference Sheet 1 for further information on environmental legislation). TIP: It can be helpful to develop the compliance report format (see TIP above) such that requirements are identified in a list/register format. This facilitates updating and revision of the requirements list in subsequent years. 3.3 Gather environmental review information Undertake interviews and if appropriate, complete review questionnaires (internal). Consider undertaking dialogue with external stakeholders. Collate relevant information from other internal sources and external publications (see Part 3 for further discussion of relevant issues) which will help to form a "performance benchmark" against which review findings can be compared. TIP: Data collected to establish the performance benchmark would include, for example: public commitments (e.g. Policy and statements presented in Annual Reports); competitors environmental reports; external standards/guidance (e.g. UNEP publications, environmental reporting guidance); relevant legal documents; internal environmental performance data (e.g. energy use information); reports/articles prepared by environmental pressure groups relevant to financial organisations. TIP: Achieving input from stakeholder dialogue into this process can add credibility to the output. Guidelines on Environmental Management and Reporting for the Financial Services Sector Page 18

23 TASKS STAGE 3: COMPLETE AN ENVIRONMENTAL REVIEW TIPS FOR IMPLEMENTATION 3.4 Evaluate environmental review data Based on the analysis, prioritise the relative significance of each impact in terms of the financial, legal or reputational risk or opportunity for the organisation. (See Part 3 for a discussion of the risks/opportunities by business activity). It is critical that this process is transparent, robust and able to be replicated. Consider completing a cost : savings assessment, in particular, for areas of direct, operational impact. Compare the findings of the review with the overview information provided in the business case (see Stages 1 and 2). Identify if there are particular discrepancies or omissions from either review and resolve. TIP: Evaluation is typically achieved using matrices rating impact against significance assessment criteria. Frequently, impacts are graded as high, medium or low significance. Significance criteria can include the following: Legal requirements; Internal policy requirements; Organisational commitments (e.g UNEP statements); Contribution/scale of the source activity within the total business activity (and hence relative scale of the impact); Degree of controls already in place or (in the case of indirect impacts) ability to influence and effect change; Potential to impact business performance; Severity/irreversibility of resulting damage; Level of stakeholder concern (internal and external); Position relative to or intentions to adopt/meet good practice; and Potential environmental opportunities for improvement. TIP: To achieve cost : savings assessment, existing data on expenditure will need to be collated and assessed. This exercise is able to form the basis of future resource management and consumption/cost reduction plans. TIP: The analysis needs to identify areas where management changes and improvements need to be made, consider how issues can be addressed most effectively, and, in particular, identify at which level in the organisation they need to be addressed to achieve improvement. For example: Procedural or strategic issues should be addressed by taking action at Group level; Issues associated with a particular product/service line may need to be addressed at the business unit level; and Specific operational impacts may need to be addressed at a location or national level, or by a function group (e.g. facilities management). 3.5 Report key findings of the review Communicate findings to the Board as well as the business units/functions involved with completing the review, agree those findings that will be taken forward and, broadly, the time frame for programme implementation. (See Stages 1 & 2). TIP: Take into account the overall timescales developed and for those issues which will be addressed in later stages of implementation, particularly the indirect impacts, provide justification for the decision. In many cases the justification will include a "business" reason, for example: commercial sensitivity, commercial confidentiality, business impact and practice. (See Stage 6.2). Guidelines on Environmental Management and Reporting for the Financial Services Sector Page 19

24 TASKS STAGE 4: DRAFT THE GROUP ENVIRONMENT POLICY AND OBJECTIVES TIPS FOR IMPLEMENTATION 4.1 Define the scope of the Environmental Policy and Objectives TIP: Consider when determining the scope of the Group Policy: The strategy agreed with the Board (Stage 2); The findings of the environmental review; Known short-term business changes (which affect the identified environmental impacts); and Other relevant Group and business unit policy commitments. The Policy and objective commitments need to be realistic considering what can be achieved within the Policy term (typically 3-5 years) yet challenging. With each Policy revision, the commitments should advance the organisation towards achievement of better and, ultimately, best practice ("continual improvement"). It can be useful to review the environmental policies of other organisations to understand their level of commitment and scope. TIP: It is essential that the Policy and objectives receive buy-in from all affected Business Units as well as the Board. The mechanisms to achieve this need to be identified and implemented at an early stage in the Policy development process. TIP: The Policy should include a statement on the organisation s approach to internal and public reporting and disclosure of environmental information. This could include for example: separate environmental reporting, commentary in the Annual Report and Accounts and promotion at the company s AGM. 4.2 Plan for writing the Environmental Policy and Objectives Obtain copies of existing, relevant company policies and programmes which will interact with the Environmental Policy, including: Credit/underwriting/investment risk policies (portfolio and site specific) etc; Socially responsible investment policies; TIP: Objectives comprise high-level aims that provide the means to deliver and manage policy commitments. They can be presented as an integral part of the Policy document or, alternatively, they can be presented separately. For many centrally controlled management systems with local implementation, it can be preferable to provide the objectives in a separate document with more explanation of intent to guide the development of local targets which will deliver achievement of the Objectives (see Stage 5.3). TIP: Existing environmental management standards (see Appendix 1, Reference Sheet 2) set some requirements for Policy content. It is good practice to adopt these and adoption would be necessary if certification under these standards is intended. Guidelines on Environmental Management and Reporting for the Financial Services Sector Page 20

25 TASKS STAGE 4: DRAFT THE GROUP ENVIRONMENT POLICY AND OBJECTIVES TIPS FOR IMPLEMENTATION Procurement policies; Property and facilities management policies; TIP: Some organisations seek stakeholder input to their Policy and objectives development and review stages (see Stage 1.2). Health and safety policies; Corporate governance policies; and Human resource programmes. Achieve buy-in and support of the business units that will be impacted. Set deadlines for Policy and objective drafting and define Board review dates. 4.3 Draft the Environment Policy and Objectives Policy commitments are supported by objectives, which are supported in turn by targets (see Stage 5.3). In addition, consider the development of Key Performance Indicators (KPIs). TIP: Within the Policy include: description of the coverage of the Policy in relation to the business activities; commitment to environmental compliance and continual improvement; and achievable aims that will remain relevant for a period of 3-5 years. TIP: Typically organisations set about objectives, most of which are qualitative, but which must be time limited, auditable and able to be supported and delivered by realistic targets. Most objectives are developed to be applicable for a 3-5 year period such that they are reviewed and revised in parallel with the Environmental Policy (see Stage 8). Individual tasks required to achieve the objectives will be specified through targets which are typically reviewed and updated annually (see Stage 5.3). TIP: KPIs represent indicators of performance that can be used in the long term to track and report business performance and demonstrate the organisation s core values. To be successful these must be embedded into core business principles and core management processes. TIP: Frequently, first or early Policies focus on reducing impact including, in particular, direct impacts. However, Policies of organisations with more established management systems are increasingly looking to manage indirect, core business impacts and further reduce direct impact. For example: eco-innovation (finding new ways to do business with less impact), and doing more for less (good business practice) and developing new business opportunities. Guidelines on Environmental Management and Reporting for the Financial Services Sector Page 21