Both the importance and the volume of narrative reporting have increased hugely. Companies are called on to lay out their strategy, indicate their plans for the future, measure their performance, demonstrate the quality of their governance, describe their remuneration schemes and indicate their impacts on the environment, employees, society and other stakeholders.
The number of regulations mandating specific pieces of information is increasing rapidly, as is the need to explain their context and how the company is reacting. Examples include the requirement from 2018 to report on pay by gender and, in the annual report, for a separately identifiable non-financial reporting statement. From 2019 companies will also have to report on how they have complied with s172 of the Companies Act and report on the ratio of their CEO’s pay to the average employee. Energy and carbon reporting will be required from April 2019 and ethnicity pay reporting will also come soon.
Many of these regulations cover unquoted and even private companies. Large private companies will have to report on their adoption and compliance with a corporate governance code for instance, and the requirement for a report on how the company has had regard to s172 applies even to wholly owned subsidiaries.
Regulators too are under pressure to demonstrate that they are paying more attention to these areas and are both promoting best practice and stepping up pressure directly through enforcement on annual reports and indirectly through pressure on auditors to increase concentration on “other” information in the annual report.
We can guide you through the resulting complex web of requirements to meet obligations. We can also help you to refine the description of your business model, identify and describe your main stakeholders and develop appropriate KPIs for your effect on them.
This is not just a compliance exercise. Many investors have become more interested in narrative reporting and both quantitative and qualitative non-financial information. Many of the world’s asset managers have called for better and more balanced communication in key, but difficult to measure, areas such as long-termism and better communication of plans, clarity of corporate purpose, impacts on human rights and better information on culture and how it is maintained.
We understand how investors look at companies and can help you communicate more effectively. Companies are far more likely to have their full potential recognised by the capital markets if their Boards demonstrate a clear vision, a roadmap to achieve their goals and a focused management team committed to delivering sustainable value for their shareholders and other key stakeholders.