Burberry: Strengthening sustainability commitments and communication

• Highly commended: Communicating integrated thinking

What?

Burberry, a British luxury brand, strengthened its sustainability commitments in 2022, pledging to become climate positive by 2040 and announcing new commitments on biodiversity. To achieve its ambitious goals, the company has taken steps to integrate sustainability into its strategy, culture and decision making.

Sustainability-related metrics and targets are externally assured and embedded throughout the business. Investors receive updates on these metrics and on Burberry’s strategy, commitments and approach to sustainability through regular reporting, investor meetings and the company’s website. Burberry also created a responsibility factsheet to summarise clearly and succinctly its sustainability commitments and what these mean for the business.

Burberry’s annual report provides detail about the sustainability strategy and includes the company’s TCFD disclosures. A new sustainability finance team led the work to produce a detailed TCFD scenario analysis and quantified the company’s climate-related physical and transition risks. The finance function also champions sustainability-linked financing and prepares use of proceeds reports on the company’s sustainability bond. A new revolving credit facility is tied to Burberry’s climate positive ambition.

Leaders at the company have spoken at wider events, including COP26, about Burberry’s approach to integrated thinking and its experience of building a more sustainable business.

Why?

Burberry believes that operating sustainably is necessary for the company’s continued growth and resilience. This involves not just considering environmental and social issues in major financial decisions – important though these are – but bringing sustainability into day-to-day decision making across the business.

Having noted increasing interest from stakeholders in companies’ environmental and social performance, Burberry saw commercial value in keeping its investors, consumers and employees informed about the company’s sustainability strategy and targets. Burberry thinks the benefits of this approach have included a lower cost of capital, enhanced reputation and stronger employee engagement. The company also draws on feedback from stakeholders to make sure its content and reporting address stakeholders’ needs and areas of interest.

Burberry recognised that its work on sustainability would benefit from skills that finance could contribute, including the ability to understand and interrogate data, challenge performance, and apply rigour to reporting. This was a driver for setting up the sustainability finance team. For Burberry, these finance skills are vital to the company’s ability to articulate its sustainability performance both internally and externally. Having a dedicated sustainability finance team also gives Burberry the resource to stay informed about regulatory developments so that the company can respond quickly to changes.

How?

Burberry has embedded sustainability throughout the business and communicates its work to both internal and external stakeholders:

• Executive directors’ bonuses and long-term incentives are tied to performance on sustainability. Leaders of each business area also have sustainability performance metrics. A sustainability committee, co-chaired by the CEO and CO&FO, reviews progress against sustainability KPIs quarterly.
• Cross-business collaboration is vital to Burberry’s sustainability work. The sustainability team provides subject-matter expertise, finance brings reporting rigour, and business areas own their KPIs and strive to meet them. A newly-formed sustainability finance team will play a major role in supporting and strengthening this internal collaboration.
• Finance representatives attend investor meetings, using direct investor feedback to shape future reporting.
• Burberry works closely with its supply chain. In supplier agreements, the company makes clear its expectations on social and environmental issues such as carbon emissions and human rights. It also created a guide on renewable energy that it shared with key suppliers.
• Educating employees on their role is crucial to bringing sustainability into day-to-day business decision making. Finance led an internal educational initiative, ‘Sustainability in Action’, that has been delivered to over 600 colleagues. Sessions build employees’ knowledge about social and environmental issues and how employees can contribute to Burberry’s sustainability goals.
• The annual report provides information about Burberry’s governance over its sustainability strategy and narrative on the company’s progress. It documents Burberry’s social and environmental KPIs, many of which have been externally assured. The TCFD report is detailed with narrative about the company’s most significant physical and transitional risks, scenario modelling and key assumptions as well as quantification of financial impacts over time.
• Burberry is developing a roadmap for achieving its climate positive ambition, which will show the targets that the company is working to and how it plans to get there from a set baseline. Baseline carbon emissions have been published in the annual report alongside the assumptions underpinning the calculation.
• Burberry’s responsibility factsheet provides key information to investors in a concise and easily digestible format. The factsheet summarises details of Burberry’s work and targets in areas such as environmental sustainability, raw materials sourcing and community investment.
• Senior leaders at Burberry participate in many business groups in the luxury industry, engage directly with the British Fashion Council and discussed sustainability with peers at the 2022 Global Fashion Summit. Their goal is to inspire others in the luxury fashion industry to operate more sustainably.