Evidence of better building blocks in FTSE 100 corporate reports

We discussed key changes and evolutions in FTSE 100 reports based on the results of our latest research “Rewiring the Ecosystem for Resilience”. Specifically, the webinar hosted on 2 July delved into developments and better practice in the typical building blocks of an Annual Report such as the business model, strategy, performance sections, risk, remuneration, and how these align.

The event was led by Sallie Pilot, Chief Engagement Officer. Discussing our findings and answering participant questions were Anne Kirkeby, Lead Corporate Reporting Consultant; Waka Wang, Research Consultant and Eleonora Puglisi, Reporting Consultant. A video recording of the session can be found here. Key points from the discussion, and research are below.

Overview of our research

Our research this year shows substantial improvements in areas impacted by new reporting requirements such as the 2018 UK Corporate Governance Code, the 2018 Guidance on the Strategic Report and the Companies (Miscellaneous Reporting) Regulations 2018.

In particular, we found material changes in relation to directors’ regard for stakeholders, purpose and culture. In addition, themes such as climate change, ESG more broadly and business transformation have also seen a significant shift. Corporates are heeding the call for better disclosure for wider audiences, and appear to have the base set for more authentic and meaningful disclosure in the years to come. Demands and interest in corporate value contributions to society have been accelerated by the COVID-19 pandemic, and we expect such interest to continue.

Practical tips inspired by our findings

1. Clearly communicate your organisation’s purpose, mission and vision. When asked about practical advice on how purpose can be evidenced throughout an Annual Report, Anne noted an emerging trend where companies typically try to evidence a clear line of sight at the start of the report to show integration. This often takes the form of a spread stating how the organisation’s purpose, strategy or KPIs align to the values and culture needed to achieve the strategy. In some instances, this may even be linked to remuneration.
2. Identify your key value drivers and illustrate your business model outcomes.
3. Provide insight into key market trends and how you are positioned to respond to them. In terms of integration, our research revealed that 46% of companies now include a reference to sustainability issues in their market review sections, up from 29% in 2013.
4. Highlight your competitive advantages and show how your strategy capitalises on them. In addition, Eleonora made the point that the Annual Report should not be the sole location of such information, rather information like this (often housed in a company’s investment case), needs to be communicated more widely through other communication channels to better publicise key differentiators.
5. Disclose clear strategic goals in the context of opportunities, risks and your purpose.
6. Explain the near, mid and long-term initiatives that comprise your strategic roadmap. Although just 16% of companies were found to set timeframes for strategic priorities of five years or more into the future, we expect this to figure to grow in time. Primarily due to increased pressure from investors and regulatory bodies, which in turn is a likely result of the COVID-19 impacts on businesses globally.
7. Identify consistent, long-term metrics for measuring your progress against the strategy.
8. Explain how your capital and non-capital investments support value creation. A practical tip given by Waka in response to a question about where to position content in reports, was to ensure that the corporate website is not overlooked. Much like stakeholders, investors come in many forms, and websites allow for more personalised packaging of information such as capital allocation and other key information used in investment decisions.
9. Identify principal risks and describe your systems for mitigating them. Encouragingly, we found that 73% of companies now discuss their risk appetite and tolerance, up from 49% in 2015.
10. Demonstrate a clear link between remuneration, strategy and value creation. We’ve seen 41% of companies link non-financial KPIs to executive remuneration – up from 24% last year.
11. For more information, or to download a full copy of our research detailing trends in each section of a typical Annual Report, visit our “Rewiring the Ecosystem for Resilience” webpage.
     

How we can help?

• Led by insight - We provide research-led consultancy insights to enhance communications and support better practice reporting. This includes regulatory advice, consultancy for ESG and Sustainability, as well as benchmarking. We can also help frame and inform your COVID-19 report communications, and give advice and guidance on how to best communicate and engage with your stakeholders through various platforms. 
• Communications planning – We can work with you to develop a communications plan that ensures a coherent and consistent suite of messages are delivered in a seamless and integrated way through all your touchpoints.
• Connecting through film - One of the most powerful ways to reach remote audiences is to harness the power of film. We would recommend including rich media such as video or animations in your communications mix.
• Engaging your remote workforce – This will remain one of the biggest challenges facing organisations even beyond the pandemic. We can help you connect and engage with your employees by developing internal communications programmes and by opening new digital engagement channels such as employee Apps.
• Sustaining your voice through digital marketing – We can help to  continue to sustain your external communications, across social media, through broadcast channels such as email, and ensure that you stay relevant and connected with your stakeholders.
• Measuring engagement and interactions - As more communications go online, your company will need to understand how people are engaging with you. We can help you develop measurements and analytics that give you the insight to continuously improve the effectiveness of your communications.

If you would like to find out how else we can support you, please contact Naomi Hawkins.

Black Sun is a stakeholder communications company. We help businesses to communicate authentically how they deliver value to inspire, engage and influence their important stakeholders. We believe that inspiring strategic communications can spark positive change and drive long-term, sustainable performance. We want to work with companies who want to build better businesses through better communications.