Mitchells & Butlers plc – Annual report – 25 September 2021
Corporate governance statement (extract)
Climate change reporting
Reporting prior to 2021
For periods beginning on or after 1 April 2019, The Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 required new or enhanced directors’ report disclosures on greenhouse gas emissions and energy consumption. Quantitative and narrative disclosures on energy consumption and energy efficiency measures were added to the pre-existing greenhouse gas emissions disclosures. Additionally, the regulations brought in a new requirement to report on the principal measures taken to increase energy efficiency if any such action has been taken in the organisation’s financial year.
Last year’s Strategic Report set out these principal measures but for FY 2021 it has been expanded to set out not only the principal measures and their progress since then, but also our future aims in this area.
New mandatory reporting and disclosure requirements
The Taskforce on Climate-related Financial Disclosures (‘TCFD’) was established by the Financial Stability Board in 2015 and published its final report in June 2017. The report set out eleven recommended disclosures under four pillars to promote better disclosure:
TCFD : four recommendations and eleven recommended disclosures
The new Listing Rule
The new climate-related disclosure Listing Rule 9.8.6R(8) is a continuing obligation for premium listed companies in annual reports for periods commencing on or after 1 January 2021 and thereafter (so the first Annual Report where reporting for the Company will be mandatory will be that for FY 2022). The rule requires companies to disclose:
- whether they have made disclosures consistent with the four recommendations and eleven recommended disclosures set out in section C of the TCFD Final Report in their annual financial report;
- where these disclosures can be found in the annual report; and
- a ‘comply or explain’ obligation to explain:
– if they have not included disclosures consistent with all of the TCFD’s recommendations and/or recommended disclosures, which disclosures they have not included and the reasons for not including them; and/or
– why they have included some or all of the disclosures in a document other than their annual report.
Where not all required TCFD disclosures have been provided, in addition to explaining why, the annual report now also needs to explain:
- the timeframe for compliance; and
- the steps the company is taking or plans to take to achieve compliance.
Institutional Investor requirements
Institutional Investors will expect all listed companies to be reporting against all four TCFD pillars and want those disclosures to be more meaningful and will be instructing their clients accordingly in relation to voting. They will also expect companies to include a statement in their annual report that the directors have considered material climate-related matters when preparing and signing-off the company’s accounts.
2. Actions being taken by the Company
The Board has tasked Phil Urban with spearheading the Company’s approach to tackling Climate Change reporting across the organisation and since he also chairs the Executive Committee, he will be ensuring focus at Executive Committee level. The Remuneration Committee has been tasked with considering appropriate targets over FY 2022 to ensure that executive management are driving the right outcomes at the pace that the Board wants to see.
The Board is mindful of the business impacts relevant to the sector, and due consideration of such will be included when considering changes made across the business in relation to Climate Change obligations. Going forward, this important issue will continue to form part of the considerations taken into account by the Board when it is evaluating strategic decision and investment priorities. Capital expenditure proposals submitted to the Board will include appropriate details on such aspects.
Climate change issues are discussed at Board level and the Board has specifically requested the Corporate Responsibility Committee to focus on ESG/sustainability matters. The Company’s required climate response/ transformation will be a feature of future agendas, with priority being given to ensuring enough time is dedicated to the discussion. The Corporate Responsibility Committee has approved and recommended to the Board the Group’s sustainability roadmap through which it has identified and agreed how to manage climate-related issues. These initiatives will continue to be addressed in FY 2022 in readiness for when TCFD compliance becomes compulsory for the Company.
Risk and Scenario analysis
During FY 2022, the Company will develop further a rigorous climate-change scenario impact analysis and this will be a matter which will be addressed in FY 2022. The Audit Committee is tasked with ensuring it is satisfied that the scenarios are sufficiently challenging, diverse and relevant, and also ensuring through this process and the Risk Committee that its risk monitoring activity appropriately addresses climate change risks for the Company.
Information, reporting and assurance
The following aspects of the Company’s readiness for TCFD reporting will be addressed during FY 2022:
- whether climate-related management information is robust and fit for purpose;
- the extent to which any external data, or external expertise that the Company relied upon is reliable and credible;
- whether the finance function has taken ownership of information and accounting around climate change and, if not, whether there are there sufficient checks and balances to give confidence in the information;
- consideration of the findings of reporting reviews such as the FRC’s climate change thematic review will be considered. Changes to annual report processes and reporting will be examined and implemented as necessary; and
- the level of internal or external oversight or assurance to which the Company’s metrics will be subjected.
The Board is responsible for the Company’s internal risk management system, in respect of which more details can be found in the ‘Risks and uncertainties’ section of this report, and in the following section of this statement.
Directors’ report (extract)
Greenhouse gas (‘GHG’) emissions statement
New climate-related disclosures are required in FY 2022 and the reporting aspects are discussed in depth in the Corporate Governance Report on pages 72 and 73. Our climate change policy initiatives are dealt with in the Strategic Report.
The Group generates GHG emissions throughout its estate of bars and restaurants for heating, cooling, lighting, and catering including the refrigeration and preparation of food and drink.
GHG emissions per ￡m turnover increased by 0.9% from a location base and reduced by 42.2% from a market base during FY 2021 in comparison to FY 2020 due to four key factors:
- Although the UK lockdown during the global pandemic led to our sites being closed to the public, most of the portfolio has in-house managers and landlords resulting in the need to heat and light these properties. This led to a similar level of operations with a significant reduction in turnover resulting in negative impact on our intensity ratio.
- Our approach during the lockdown was to offer take-out services once the initial lockdown measures had eased. This led to a similar level of operations with a reduction in turnover impacting on our intensity ratio.
- As part of our commitment to carbon reduction we have switched our Scope 2 purchased electricity to green, REGO-backed supplies leading to a significant reduction in market-based emissions.
- Our continued focus on deploying energy efficiency measures and actions during the lockdown mitigated the impact of the loss of turnover against our intensity ratio resulting in only a minor increase.
Table 3: Mitchells & Butlers’ carbon reporting disclosure
Energy efficiency action taken
Throughout the global pandemic and subsequent lockdown phases in the UK we have provided energy efficiency guidance and support to our managers to help mitigate energy and emissions from our sites. The lockdown phases led to a halt of our overall energy efficiency programme and deployment of measures, and we are expecting an increase in activity in this area in the following year as lockdown measures ease.
Location and market based reporting methodologies are used due to Scope 2 emissions being derived from REGO backed electricity purchasing within the UK portfolio. For transparency we have reported two intensity ratios; a location-based ratio for both Scope 1 and 2 emissions and a market-based ratio with Scope 2 emissions removed to account for the purchasing of REGO backed electricity.
Global GHG emissions and energy use data for FY 2021
* Note that a market based emissions total was not reported in FY 2020 so comparison is unavailable.
** Intensity ratio is based on the turnover for the financial year of £1,065m.