UK’s largest retailers ‘greener but less focused on DE&I’, study finds

The UK’s largest retailers are stepping up their efforts to become greener but losing focus on diversity and inclusion initiatives and cyber security, national law firm Irwin Mitchell’s new Environmental, Social, and Governance (ESG) report has revealed.

Irwin Mitchell has analysed the annual reports of the retailers in the FTSE 350 and has looked 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, the firm 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 with 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 and hospitality firms. However, retail’s use of the phrase is higher than leisure and hospitality, but the annual increase is just 6.5%.

According to the report, there are variations in the number of mentions about diversity, equity and inclusion (DE&I) also. It revealed that the retail sector decreased its DE&I mentions by 7%.

Charlotte Rees-John, partner and head of Irwin Mitchell’s Retail, Hospitality and Leisure sector, said: “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.”

Additionally, 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.

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

Keith Davidson, environmental law partner at Irwin Mitchell, added: “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.”