Companies in the extractive industries appear to have engaged more with climate-change risk in their disclosures in 2020 than they did in 2019, especially in the front end of their annual reports.
According to a report by ACCA and the Adam Smith Business School, Climate-change risk-related disclosures in extractive industries: a comparative study, the average level of disclosures in the introductory section of annual reports jumped from 39% in 2019 to 50% in 2020. However, disclosures on climate change are still largely missing from the financial statements and related notes (see graphic below).
While climate change-related disclosures in the front end of annual reports are improving, there are wider questions in play. The issue has been raised about whether the impact of climate change on a company can be considered in isolation from the negative impact it is expected to have on its external environment, which must inevitably affect the company itself at some point.
In turn, this brings into question whether fundamental accounting should be applied to climate change or whether a different approach should be considered for its reporting in the front half of the annual report.
Methodology
The study analysed the 2019 and 2020 annual reports of the 60 largest ‘polluters’ in the extractive industries as measured by their average Scope 1 and Scope 2 carbon emissions over the period 2016–18.
