Almost all FTSE All-Share companies now mention the environment in their corporate reports, but few are disclosing environmental information in line with best practice guidance, according to research last week from The Environment Agency.

The Environmental Disclosures report, carried out by environmental research firm Trucost, found that the level of environmental reporting had improved significantly since the last report in 2004 with 98 per cent of FTSE All-Share companies now including the environment in their reports compared to 89 per cent in 2004.

However, while the quality of the reporting also improved very few companies embraced environmental disclosure best practices endorsed by the Environment Agency. Just three per cent of firms disclosed quantified comparable data across all three core environmental key performance indicators (KPIs) of water, waste and climate change impacts, while less than a third of companies provided any quantified figures on energy use or carbon emissions.

Similarly, only 35 per cent of firms included environmental disclosures in the audited sections of their reports, with many others relying on unsubstantiated claims about their environmental performance.

The Environment Agency said the findings left it concerned that investors were at risk as a result of the failure to provide more audited environmental data. It noted that "the levels of quantitative disclosures on environmental risks (and opportunities) that are financially material to shareholder and potential investors remain relatively low".

Speaking at the launch of the report, Barbara Young, chief executive of the Environment Agency, said that she was "disappointed and concerned" by the report's findings. "Such inadequate reporting gives investors and shareholders insufficient information to base their decisions on and this isn’t good for the environment or the economy," she explained.

The Environment Agency added that under new reporting legislation introduced this month, businesses "must disclose environmental KPIs where appropriate, or explain lack of disclosure".

However, Simon Thomas, chief executive of Trucost, said that the 2005 decision by the government to scrap the proposed Operating and Financial Review (OFR) legislation, which included environmental reporting requirements, and replace it with a phased introduction of environmental reporting legislation, had left many businesses "confused about their obligations".

The latest report contrasts with a similar study of FTSE 500 companies from lobby group the Carbon Disclosure Project, which found that three-quarters of firms now have emissions-reduction strategies in place, while 80 per cent are reporting on both the risks and opportunities associated with climate change.