Climate change and how we are
responding to the risks and opportunities
that it poses are at the forefront of the
minds of our investors, regulators and
other stakeholders of our business.
We support the Task Force on Climate-related Financial
Disclosures (‘TCFD’) and its recommendations and are
committed to assessing the impacts of climate risks and
opportunities across our operations and supply chains.
We have integrated climate governance into our existing governance processes
and sought to embed responsibility for the risks associated with climate change throughout our business, adopting a climate change focused mindset. There is a clear commitment from the Board to deliver on our environmental commitments
and ensure relevant accountability across the business.
Our environmental strategy was initiated to ensure a joined up approach across the business considering the risks and opportunities climate issues pose and how we are responding to them.
The Corporate Responsibility Committee is responsible for holding the Executive Directors to account with respect to climate risks and their impacts on the business. Our environmental strategy is a standing agenda item for all Committee meetings.
The responsibility for assessing and managing climate related risks sits at both executive and Board level. Executive responsibility for climate change impact is held by all our Executive Directors, who have responsibility for overseeing our climate change agenda and are responsible for ensuring that climate related risks are integrated into our existing business strategy. Responsibility for the consideration of climate related risks on the financial performance of the Group and compliance with environmental reporting rests with our CFO, Jamie Warner.
Our Risk Forum undertakes a review of climate related risks with our Operational Leadership Team (‘OLT’).
The Committee introduced ESG related targets into the Performance Share Plan (‘PSP’) for the first time in 2021. In 2022, the PSP included a performance target linked to a reduction of our GHG emissions and it will also be included in the 2023 PSP.
Our GHG emissions have been independently assured by EcoAct using ISO 14064-3 for all scopes of our carbon footprint.
Our environmental strategy not only focuses on our own environmental impact, but also aims to support our customers, consumers and the industry in which we operate and, as a result, various parts of the business play a part in delivering our ambitions. Different parts of the business are brought together through our various working groups, which are supported by members of our OLT. Key activities and milestones are set for each financial year and these are shared with the Corporate Responsibility Committee. The working groups meet individually as required but meet collectively on a quarterly basis:
Our employees play a fundamental role in the success of our environmental strategy. Our Sustainability Network comprises passionate individuals from across the business who are focused on making life at Auto Trader more sustainable through increasing employee awareness and driving impactful changes for both individuals and our business, supporting our overall goal of reducing our carbon emissions.
As the world transitions to a low carbon economy, regulatory change and
changes in consumer behaviour will have an impact on the automotive
market, meaning we need to develop and adapt our business strategy
accordingly. Reducing the impact our business has on the environment
is embedded into our wider business strategy of acting responsibly and
we are committed to being a net zero business by 2040. As well as
reducing our own emissions, we are also raising environmental awareness
with both our customers and consumers, encouraging them to reduce
their own environmental impact.
We use our breadth of expertise, data and market insight to accelerate the
transition to low carbon transport, working with the automotive industry.
Climate-related risks and opportunities
To build climate resilience into our business strategy we identify climate related
risks and opportunities. As an online marketplace, we have a relatively small
carbon footprint and our business model is sustainable in a low carbon
environment. However, with the acquisition of Autorama, our emissions have
increased due to the vehicles sold by Autorama that temporarily pass through
their balance sheet. The nature of the risks and opportunities that we face
depends not just on the physical aspects of climate change, but also on
transition risks. These are driven by the trajectory of our customers and
consumers in responding to climate change and the regulations applied to
the market we operate in.
During the year we refined our assessment of the risks and opportunities posed by climate change and how they might impact our business. We considered the transitional and physical climate risks and opportunities presented by rising temperatures, climate related policy and emerging technologies. We agreed the methodology for assessing and quantifying financial impacts. For the purposes of our assessment, the time horizons we used were as follows:
In each case, the likely impact on costs or revenues was assessed. We have assessed how the risks can be better managed, reduced or mitigated in line with the Group’s risk management framework and business strategy. The risks identified during our analysis are more likely to present themselves in the medium or long term.
Having assessed and modelled the risks, we believe that there is no immediate material financial risk or threat to our business model. Even though there is uncertainty around the time horizon over which climate risks will materialise, stakeholder expectations and regulatory attention could develop at pace, impacting the rate at which the business may need to cut carbon emissions.
We recognise that we will need to keep abreast of future climate change legislation as well as consumer preferences and retailers’ ability to adapt. However, we have a strong track record of quickly evolving.
The results of our scenario analysis inform our long-term strategic business planning and are overseen by the Corporate Responsibility Committee.
Climate-related risks and
opportunities scenario analysis
We have undertaken scenario analysis to measure the potential
financial impact of the and risks and opportunities identified,
taking into consideration different climate-related scenarios.
Metrics and targets
The Group is required to measure and report its direct and indirect greenhouse gas (‘GHG’) emissions by the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018. The GHG reporting period is aligned to the financial reporting year. The methodology used to calculate emissions is based on the financial consolidation approach, as defined in the Greenhouse Gas Protocol, A Corporate Accounting and Reporting Standard (Revised Edition). Emission factors used are from the UK Government’s Department for Business, Energy and Industrial Strategy (‘BEIS’) conversion guidance for the year reported.
We have calculated our footprint using the official UK Government conversion factors. For general procurement categories, an Environmentally Extended Input Output database methodology was used to calculate the GHG footprint across total spend in the year. For vehicle purchases, a bottom-up, life cycle assessment-based approach has been used.
We have approximated and rounded up where necessary, reflecting this is a ‘scoping exercise’ to indicate the broad quantum of emissions rather than a precise calculation. The accuracy of our footprint will get better each year as we revisit and refine the methodology and underlying dataset. We have reported our Scope 2 emissions using both a location based and market based approach, with the latter taking into account renewable energy consumed.
Rebasing of our calculations
During the year we acquired Autorama and we have therefore undertaken work to calculate their emissions and include them within our base year (2019/20) and every year thereafter. We have also undertaken work to identify more accurate data in relation to our suppliers and include this in our calculations. The data resulted in a change of more than 5% in our emissions and so we have recalculated our base year and every year thereafter using the updated data.
We have disclosed our rebased base year, prior year and current year to take into account these changes and will be updating our climate targets accordingly.
Independent verification of our GHG emissions
EcoAct has independently assessed and verified Auto Trader’s GHG emissions following verification standard ISO 14064-3:2019. Based on the data and information provided by Auto Trader and the processes and procedures followed, nothing has come to EcoAct’s attention to indicate that the GHG emissions totals for all years reported are not fairly stated and free from material error.
The Board is collectively responsible for determining the nature and extent of the principal risks which may impact the business as it seeks to achieve its strategic objectives. We recognise climate change as a principal risk as it poses a threat
to our business and supply chain, mainly through regulatory changes. We have
updated our risk management process to enhance our assessment of the
potential implications of climate change on our business and its operations.
Our risk management framework, including the processes for identifying,
assessing and managing risk, is set out in the Risk management section
of this website.
Our net zero commitment
Net zero refers to the balance between the amount of greenhouse gases produced vs the amount removed from the atmosphere. We reach net zero when the amount we add is no more than the amount taken away. As a responsible business, we are committed to reaching net zero by 2040 — ten years ahead of the government’s target.Read More
Supporting the industry
The government’s plans to reach net zero are ambitious and a lot need to happen in the coming years to ensure the infrastructure is in place to support the mass consumer adoption of EVs. We are also playing an active role supporting the industry with their own sustainability plans.Read More
To support consumers in making the switch to more environmentally friendly vehicles we have increased the coverage and exposure we give electric vehicles (‘EVs’) across all our platforms. In particular, we have introduced an EV hub on our website where consumers can access articles and videos on electric vehicles, reviews and advice.Read More