Although not identified in the Task Force on Climate-related Financial Disclosures (TCFD) recommendations as a key sector, the retail, health and consumer goods sector was analyzed as part of the 2019 EY Global Climate Risk Disclosure Barometer report because of its economic importance. In this analysis of the retail, health and consumer goods sector, health included pharmaceuticals, health care and medical services. Each of the companies that were analyzed by EY received a score for the coverage and quality metrics on the basis of how they addressed or implemented each of the 11 recommendations by the TCFD.
Collectively, companies in the retail, health and consumer goods sector were among the lowest performers of all the sectors assessed by EY. On average, companies covered less than half of the 11 TCFD recommendations and the majority of disclosures were focused on the targets and metrics area, with risk management disclosures being the least covered.
The overall quality of disclosures was low and showed a need for improvement, with the targets and metrics area showing the highest level of quality (of the information disclosed) and strategy areas the lowest.
The leading markets were mostly in Europe and included Spain, France, Germany and the UK. The markets not performing as well included the Philippines, China (Mainland), Hong Kong, Kazakhstan and Russia, which typically did not cover any of the recommendations.
EY teams analyzed how the retail, health and consumer goods sector performed against the four areas, through which the TCFD recommendations are structured.
In the analysis, the most commonly adopted TCFD governance areas in this sector was related to management’s role in assessing and dealing with climate-related risks and opportunities. Generally, disclosures comprised of high-level discussions about the role of management around sustainability. However, climate was only one element among other corporate sustainability topics. In addition, most companies did not provide a detailed description of the board’s responsibility over climate-related risks and opportunities.
Top-performing companies were usually from markets with an increased maturity of legislation, such as France, the UK and Australia. Companies in these markets reported detailed information relative to the integration of climate-related risks in their corporate governance structure at both the board and management levels. This information included the composition of the board, interaction between committees and management, the frequency of meetings, and how climate-related risks and opportunities were linked to the overall business strategy and business model.
Some of the best governance practices included the implementation of management committees (e.g., sustainability and corporate social responsibility (CSR) committees) responsible for overseeing climate topics. Communication and board oversight with these committees was often through a direct reporting line or board member participation in the committee.
In the analysis, the most commonly adopted strategy recommendation within this sector was the disclosure of climate-related risks and opportunities, and their time horizons. It is worth noting that risks were given more attention than opportunities in the majority of disclosures.